The amount of US consumer borrowing for November broke well above expectations with an increase not seen in ten years, with credit increasing by $20.4 billion to $2.48 trillion (when analysts expected about a $7 billion gain, according to Bloomberg). This represents another sign that consumers are more confident, but improvement is still needed in the economy.
This monthly jump is the largest since November 2001. Revolving debt, such as credit cards, increased by $5.6 billion in November (the biggest increase since March 2008). Non-revolving debt, such as loans for education, autos, and mobile homes, increased by $14.8 billion (the largest increase since February 2005).
According to Bloomberg, auto purchases were at a 13.59 million annual rate in November, the highest level since August 2009.
"Credit growth is a positive sign for the recovery in that it signals increasing demand and willingness to spend," said analyst at IHS Global Insight Paul Edelstein. (via Reuters)
But he also told Reuters that it might indicate chronic unemployment causing more people to rely on credit for necessary spending.
Business Section: Investing Ideas
Regardless of what the increased use of credit indicates about the economy, it is undoubtedly beneficial to credit service companies, whose main source of revenue is the repayment of the loans they extend.
To narrow down the list of credit service companies, we ran a screen on the universe to find those with the most bullish changes in sentiment from short sellers month-over-month (i.e. the biggest decreases, as a percent of share float).
Use the Turbo Chart to Compare the Performance of the Two Companies in the List to the S&P 500:
Do you think these companies are poised to do well?
1. Encore Capital Group, Inc. (ECPG, Earnings, Analysts, Financials): Engages in consumer debt buying and recovery business. Market cap of $531.16M. Shares shorted have decreased from 895.72K to 701.12K month-over-month, a change representing 1.58% of the company's 12.33M share float.
2. First Cash Financial Services Inc. (FCFS, Earnings, Analysts, Financials): Operates retail-based pawn and consumer finance stores in the United States and Mexico. Market cap of $1.05B. Shares shorted have decreased from 2.56M to 2.18M month-over-month, a change representing 1.39% of the company's 27.26M share float.
(Written by Alexander Crawford. Short data sourced from Yahoo! Finance, all other data sourced from Finviz.)
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Analyze These Ideas: Getting Started
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Encore Capital Group, Inc. (ECPG, Chart, Download SEC Filings)
- First Cash Financial Services Inc. (FCFS, Chart, Download SEC Filings)
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