Sunday, August 25, 2013

Desperation Stocks

'Pawn Stars' and 'Hard Core Pawn' are two popular reality shows on television which cover family run pawn shop operations. Pawn shops do well when the country is in an economic downturn and unemployment is high, but continue to bring in business when times are good, since there is always a sector of society that has no bank connections or credit cards. There are about a dozen stocks involved in the pawn shop industry and related industries, such as payday loans, which appear on the free list at These companies are sometimes called 'Desperation Stocks' since when people need to borrow money and they can't borrow from a bank or credit card, they become desperate and either get a payday loan or they take an item into a pawn shop.
The largest publicly traded company in this field by market cap is First Cash Financial Services Inc. (FCFS), based in Arlington, Texas, which has a market capitalization of $1.5 billion. It has pawnshops in over 800 locations in Texas, Colorado, District of Columbia, Indiana, Kentucky, Maryland, Missouri, Nebraska, Oklahoma, South Carolina, Virginia, and Wyoming, and also in 24 states in Mexico. In addition to pawn loans, First Cash also offers payday loans and title loans on automobiles. The company also buys, gold, silver, and platinum and provides Western Union services.The stock trades at 19 times trailing earnings and 15.5 times forward earnings. Revenues for the latest quarter were up 8.1%, however, earnings were down 4.2%.
The second largest is Cash America International, Inc. (CSH), a $1.2 billion company based in Fort Worth, Texas. It has over 900 locations in the United States and Mexico with the brand names Cash America Pawn, SuperPawn and Prenda Fácil. The company also offers short-term cash advance loans through the Internet to customers in the United States, the United Kingdom, Australia and Canada. The stock trades at 12.5 times trailing earnings and 9 times forward earnings, and even pays a small yield of 0.3%. Earnings for the latest quarter were down 15.7% on flat revenues.
To see a list of other companies in pawn shops including EZCorp (EZPW) and DFC Global (DLLR), which can be downloaded, sorted and updated, go to
Disclosure: Author didn't own any of the above at the time the article was written.

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