Stock Entry Point Article​

Credit Acceptance Corporation (CACC) 1

Financial stocks have had their share of ups and downs during the past few months. Credit risk, government policies, and the general economic environment have all affected the best financial stocks for 2020. The looming US Presidential elections are also positing questions to the financial sector.

There are rumors that if Joe Biden wins the elections, then the impact could be felt by various sub-segments of finance stocks to buy now. For example, a proposal to create a public competitor to credit bureaus can potentially negatively impact stocks like Experian, Equifax, and TransUnion. Experian trades on the London stock exchange and is currently up 8.39% year-to-date. Equifax meanwhile is up 11.9% since the beginning of 2020. Meanwhile, TransUnion is down almost 5.5% since the start of the year.

At the same time, Mr. Biden has also promised to reinvigorate the CFPB which could have positive impacts for consumer finance companies. Credit Acceptance Corporation has been one of the top auto related stocks to buy.

Credit Acceptance Corporation mainly provides loans to sub-prime borrowers purchasing automobiles. The company’s model is unique in the sense that it partners directly with auto dealers rather than purchase a loan which the dealer originates. CACC structures the deal in such a way that both the interests of the dealer and CACC are aligned and both receive upside if the loan does well. Therefore, CACC’s risk levels are much lower.

CACC is up 4.73% year-to-date. It has gained a staggering 114% since the beginning of April when it hit its lowest price for 2020. The auto industry has started to rebound as production lines are starting to come back after shelter-in-place orders throughout the US and many parts of the world. The demand for used cars is poised to go up as the economic downturn compels people to tighten their purses and opt for cheaper used vehicles rather than purchase new vehicles.


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