Financials - FCFS!!!
I need to get more exercise, so I can live long enough to recommend a “normal” financial stock. When the headlines are filled with stories about loan losses, that is when I want to buy financial stocks. In the mean time, I will just sit the corner and laugh/cry.
Right now, I think everyone should own FirstCash Holdings - FCFS - $100, the world’s largest pawn shop chain. Here is what I like:
40% of “stores” have been added/acquired since 2017
still plenty of room to grow regionally and internationally
has exited the “troubled” pay day loan business
there are no credit losses in pawn stores, that is the whole idea, every loan is over-collateralized
profit per store increased 50% in the five years of the 2008 financial crisis
a beneficiary of higher gold prices
very strong Latin America operator
unique business in retail Point of Sale, primarily furniture and electronics
not well understood, how many Wall Street analysts have been in a pawn shop?
I hate leverage and traditional banks are, by design, over-leveraged. There are plenty of other stocks that are included in the financial sector. This sector is 20%+ of the small/mid cap indices, so I will always be significantly under-weighted.
A reasonable person might own any of the stocks below in a 50 stock value portfolio, just for diversification.
Lincoln National - LNC - $31 - life insurance, 5.5% Yield, 70% of book, can I understand?
RenaissanceRe - RNR - $242 - smart guys, difficult to understand
Federated Hermes - FHI - $41 -very honest guys, money market funds are bouncing back, maybe a great market hedge?, has run
MidwestOne Financial - MOFG - $31 - my favorite small bank, Iowa, sold new shares this Fall
Cullen Frost - CFR - $131 - the safest regional bank, strong risk averse culture, Texas
Charles Schwab - SCHW - $74 - I have been a customer for 40+ years, seemingly collects fees when customers breath
AJ Gallagher - AJG - $278 - my favorite company, in my favorite industry (insurance brokerage), just not cheap enough
Chubb - CB - $272 - the only commercial insurer that actually pays claims
Western Union - WU - $11 - I love the concept, not the execution, Trump risk?, the Apple of the 1880’s
Principal Financial - PFG - $75 - great niche in 401k administration, 4% yield
Paypal - PYPL - $85 - I wish I could understand
Crawford - CRD.A - $11 - outsourcing claims, sound business
CME Group - CME - $237 - smart guys own the stock
Banco de Chile - BCH - $23 - politics improving, lots of mineral wealth in the country, let’s watch just for fun, 7% yield, decent lending results