Today’s pick provides debt management and recovery solutions for consumers and property owners in a range of assets, primarily in the United States.
Encore Capital Group (ECPG)
from US Investment Report
I always get a little nervous when I hear the kind of exuberance about the economy and the stock market that’s going around these days. It’s like everything’s going to come up roses in 2014. Folks are talking about another 15% upswing in the S&P 500 after last year’s 30% jump, about stepped-up business spending and hiring, about sharply lower consumer loan delinquencies, about rising housing prices, about fewer draconian spending cuts by Congress.
Yet oddly enough, this exuberance is not irrational. It could all come true. With Janet Yellen taking over from Ben Bernanke as Federal Reserve chairperson we are probably not facing any surprise changes in monetary policy. Since being confirmed the other day she’s pledged
herself to carrying out the Fed’s two main jobs—namely, fostering full employment and controlling inflation. She has said that strong job creation is her most immediate priority, with which I agree. She’s also said that, for a change, curbing inflation and creating more jobs are not at odds with each other.
This week’s release of the minutes of the December Fed policy meeting indicates that the Fed will taper down its stimulus gradually. Yellen’s first OMC meeting is in March, two months from now. For stock market investors, the message seems pretty clear. It’s a time to be fully invested in sector- or niche-leading growth stocks bought at reasonable price valuations.
Encore Capital Group (ECPG). Recommended in late 2012 at 28, shares of this San Diego debt management and recovery specialist appeared stuck in the low 30s. Alas, it would top 40 in August and end the year at 50.
A big one that got away, as fishermen say! Now at 49, with a P/E of 10 and rapid earnings growth, we suspect the consensus target of 57 is too conservative. Knowing the stock better this time, we will be more patient.
Stephen Quickel, www.usinvestmentreport.com, 215-862-0399, January 10, 2014