My Own Analyst

EZPW

My bad sticking with these jokers...  They wrote down their investment in A&B, so it looks worse than it was, but they still had a bad quarter - barely profitable.  The stock is very cheap, but these guys are incompetent at best, maybe criminal.  I should have exited already and am glad I didn't add to it.

Heaven & Hell

We have had some winners, but I am sick of our losers, TITN, SWI and EZPW.

Today, EZPW had some bad news - it's investment in a UK company (A&B) is in trouble.  It's just more of the same here...

 

EZPW Upgraded

Well, clearly this very disappointing news was priced into the stock.  FBR just upgraded the firm to Neutral.  I will be contemplating the position tonight.  My target before was 30.50, clearly too high, but based on just 10.5X forward EPS (which are coming down sharply).

EZPW Disaster

EZPW ranked 5 on my 1-5 scale in confidence, and I will pay the price in Top 20.  The company reported that it has been crushed by the gold price decline.  These guys have continually denied how much exposure they have to gold, and it's much bigger than anyone could have imagined apparently.  The stock will likely trade to $12.50-13 when it is all said and done.  Not only are earnings imploding, but the company is reorienting its Mexican and Canadian operations by ditching older stores to create newer, larger ones and taking a $21-24mm charge.

Earnings for the second half of the year by consensus were supposed to be about $1.28.  The company now expects them to be reduced by at least 0.35 (not sure why they didn't put a cap on it).  Some of this is likely priced in - everyone knew falling gold would hurt earnings to some degree.  At 75% of book value, the stock would trade about $13.  7 PE sounds about right here, and that should be about $12.50.  A large sale by the Chairman the other day above 18, in retrospect, was a tell.

Great friggin way to start the quarter...

EZPW

I don't all the details yet, but DLLR, a company I looked at and didn't like and that is somewhat similar, is getting  hammered, dragging down EZPW

ENV Update

I hope to get ENV back into Top 20.  Their report was solid, the guidance too.  I continue to think that their holders will be selling stock - like 25% of the company.  Also, they switched auditors and are likely to be late filing their 10-K, which could create some nervousness (stupidly).  Given the better market conditions, I would be content to own this one near where we sold it last quarter.  Our last sale was 13.72, when we bot INTC below 20, a new position in EZPW at 18.37 and added to STJ below 32, so it hasn't been a disaster.

CFR: Patience Rewarded

CFR, a core holding in CG/B, announced a transaction to change their capital structure today, issuing a preferred stock in order to repurchase common stock (a la Einhorn's suggestion for AAPL!).  The stock cleared 60 and appears poised for its all-time high in the 62.50 area (absent a spike in 2008).  My one-year target based on 18PE is 72, but this will allow me to raise it somewhat due to earnings accretion.  Every now and then I like to review my long-term performance with a particular name.  We added CFR in October and are up 10.37%.  Here is the entire rest of the history - never a loss:

While this deal doesn't likely change the EPS by more than 1% or so (on a 4% repurchase), it's a very strong signal from a conservative institution.

CFR Update

CFR is a great bank.  The good news is that deposit growth is just smoking.  The bad news is that it remains hard to lend/invest.  While the company signed off on analyst consensus for 2013 (which is flat), the tone was much better.  Interestingly, they flipped a block of Treasuries for a $4.4mm gain - this may account for the "beat" and isn't really sustainable.  I was surprised to hear that they did this (take a quick profit).  They also pointed to a horrible lending environment in Q4 (fiscal cliff, elections) but a better one in Q1.

The stock isn't cheap at about 15PE, but it's not real expensive and they are doing well despite lots of challenges.  I don't think that there is a lot of risk, and I think that the next move is up, but it might make some sense to lighten up at 60 area - not sure.

Financials: Huge Classic Sell Signal

Chicken Little, also known as Meredith Whitney, likes banks now...  

I was just thinking I need to cut my massive exposure in the Sector Selector ETF model...

Not an EZ Answer

Tim wants to know why EZPW is getting hammered and if it's a buy opportunity.

Last night, another top exec departed:

Eric Fosse (49) — Mr. Fosse joined us in September 2004 as Vice President of EZMONEY Operations. 

He was promoted to President – EZMONEY Division in August 2007, to President, Pawn Americas 

in July 2009 and to President, North American Operations in March 2011. In April 2012, Mr. Fosse was 

named President, U.S. Financial and Online Services. From 1991 to 2004, Mr. Fosse held various 

operating positions and ultimately served as a Regional Vice President of G&K Services, a $500 million 

provider of uniform and textile products. 

 

This morning, Nomura downgraded it on valuation to neutral, as the stock had rallied too close to its 21 target.  I am not sure that these two things are actually related.

I like the stock - very cheap, out of favor.  I do have some concerns.  While my 29.50 target would suggest a much bigger position than the current 3% or so for the Top 20, I am keeping it small until I see some execution.