It may be hard to believe, but the headline above is not a misprint, there are some financials that, for various reasons, have managed to avoid the financial sector's 2009 bloodletting. However, the length of time that a financial keeps up a positive return is anyone's guess when it seems that the sector is hitting a new low every day.
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Auto Loans Surprise
It's surprising that Credit Acceptance Corp (Nasdaq:CACC) is up 33% year to date, considering it's in the business of making "auto loans to consumers, regardless of their credit history," and financing warranty programs. So how does a company that makes subprime loans to auto buyers report 2008 earnings of $2.16 per share? An intuitive answer is: by charging high enough interest rates to cover the higher loss rates. One thing to watch is that the consumer loan dollar volume was down 21% in the fourth quarter of 2008, and this may eventually bleed over into lower earnings. (Learn more in The Industry Handbook: The Banking Industry.)
Thinkorswim Group Inc. (Nasdaq:SWIM) is up 36% year to date. This company is classified in the investment brokerage industry and concentrates in the options market, offering execution services and education to its customers. In early January, TD Ameritrade Holding Corp. (Nasdaq:AMTD) offered to buy Thinkorswim for $606 million. Options trading is one of the fastest growing areas in financial services as investors seek ways to hedge their portfolios.
Fortress Investment Group LLC (NYSE:FIG) is a hedge fund and private equity company that went public just over two years ago. At the time, the excitement drove the price up 100% on its first day of trading, from its IPO price to $36 per share. It currently trades around $1.50 per share and thanks to a 30% bump on March 4 has managed a 41% return in 2009, after hitting its absolute bottom in early January. In order to keep funds for working capital, the company didn't pay a dividend in the fourth quarter of 2008.
Last Ones Standing
The next one might come as even more of a surprise as Morgan Stanley (NYSE:MS) has had a nice bounce from its disastrous performance in 2008. As of its March 4 close, MS is up around 25% for the year. Morgan Stanley converted to a bank holding company in 2008, in order to be eligible for funds under the Trouble Asset Relief Program (TARP). Since the collapse of Lehman Brothers and Bear Stearns, it stands alone with Goldman Sachs (NYSE:GS) as one of two remaining major investment banking firms. It may be hard for investors to believe, given the current environment, but once the financial system stabilizes and the economy recovers, companies will need to raise capital and these two firms will stand to take market share if for no other reason than being the only ones left.
Nothing is Certain
It might make investors scratch their heads in disbelief, but despite the doom and gloom that pervades the investing mindset, some unlikely financial stocks are up in 2009. This list may get smaller as the sector seems to hit a new 52 week low every day, and shareholders continue to scream "no mas" and stampede to the exit. (Knowing what the market is thinking is the best way to determine what it will do next, see Gauging Major Turns With Psychology.)