I can see the danger in this stock as well. It is a great performer and I would probably be a keen buyer in the event of a real recession (ask Janet Y about that!). Is the tailwind gone for a few years? Will the jobs boom hold up? Or is CCP going from boom to bust conditions. (Not saying CCP will go broke, talking about their customer base). Also we have the used cars as collateral for some lending - these seem overvalued, and politically the gov hand-outs to lower income demographics seem to be over while inflation is a problem. There seems to be more inclination towards middle class welfare.
Operationally the problems they mention seem somewhat to have good aspects - that they need more collection staff (i.e. that the problem is fixable, and very profitable to do so), and couldn't collect as much as they need to, to justify investment, and that there is a shortage of good PDL acq opps (raises the value of their current PDL). The downside is the growth into a possible nasty economic conditions for the lowest rungs, and that these conditions could become a rug pull for collections, and dramatically reduce the DCF val of the PDL book and loan book.
By my numbers they made about 60% on their PDL Asset Bal Sh in H1, and 53% in half 2. Still very respectable returns. Their lowest recent return was about 25% in h2 2020 - and we know why that was.
I've shorted some as a trade. The analysts seem to be fans of CCP - we might see if they are still excited soon as well. Rear view mirror still looks fantastic.
CCP Price at posting:
$22.01 Sentiment: Sell Disclosure: Held
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