That's what
Portfolio Recovery (Nasdaq: PRAA) is doing.
And, man, it's a beautiful thing.
We had a big, ugly debt boom, and someone was bound to
profit off of it. Portfolio Recovery buys defaulted credit
receivables that banks and other lenders have given up on,
and then squeezes a few pennies out of the defaulted
borrowers. Since it buys the debt for something close to
nothing (about $0.03 on the dollar, on average) getting even
a sliver back from those borrowers can mean big profits.
Right now, profits aren't much to be giddy over. In the
third quarter, the company earned $10.1 million, or $0.65 per
share. That was down from $11.5 million or $0.75 per share in
the same period last year.
But the allure here is not what happens today or tomorrow,
but one, two, or three years down the road.
As consumers default in droves, Portfolio Recovery has
been scooping up piles and piles of defaulted
receivables:
Period
Face Value of Receivables
Purchased
Q3 2009
Q2 2009
$3.38 billion
Q1 2009
$960.9Â million
Q4 2008
$1.32 billion
Q3 2008
$857.2Â million
Q2 2008 Continued... |