These Businesses are Booming in a Slow Economy
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Pawnbrokers and payday lenders have always been viewed as the underbelly of the financial world; however, with the economy stagnant and the jobless rate growing (now at 8.3%), profits for these businesses are increasing rapidly and analysts are paying attention to their investment potential.
Profits and share prices at Ezcorp. Inc. (NASDAQ: EZPW) have risen steadily for the past six years. Ezcorp Inc. acquires, establishes and operates pawnshops and is based in Austin, TX. The company description states that Ezcorp, Inc "is primarily a lender or provider of credit services to individuals who do not have cash resources or access to credit to meet their short-term cash needs." Unfortunately, in this economy short-term cash needs may include utilities and groceries.
Another company experiencing a rapid rise in patronage & profits is Rent A Center (NASDAQ: RCII). All of those commercials with Hulk Hogan must be paying off. This stock is up and holding steady. For the unemployed and underemployed it may seem easier to rent a flat screen or couch with a low weekly rate instead of making a lump sum purchase.
Anyone who has followed my financial advice knows that in my opinion getting a payday loan is one of the worst things you can do for your finances. But companies like Advance America Cash Advance Centers have done well. The company just recently completed a merger with Grupo Elektra, a company that offers the same credit services to consumers in Mexico which greatly expands their customer base. Stocks like these, desperation stocks as they are called, are seeing a surge as the economic and financial news continues to stay the same or get worse. Investors can find themselves torn when deciding to make a profit by investing in companies catering to the hard-up or the down on their luck. But many are finding that it is profitable to do so. Despite the fact that the new consumer protection bureau has its sights set squarely on payday lenders, one cannot deny that there is an ever growing population using these services. Payday lender Cash America International (NYSE: CSH) has continued to see increased earnings and growing stock prices (currently trading at $37.50) and this is further evidenced by more & more stand alone stores in various neighborhoods.
And last, but certainly not least, there is the dollar store. Dollar General Corp. (NYSE: DG) is trading at $51.90 and these stores are becoming more and more popular across economic platforms. Even those considered wealthy are looking for bargains and value given the current economic state. What also helps with this expansion & growth is the willingness of these businesses to offer other financial products & services. Many payday lenders are offering prepaid cards and bill-paying services and even pawnbrokers have check cashing services on the premises. So what we are now seeing is these businesses becoming a one stop shop for all of your alternative financial needs. Check-cashing, loans, bill-pay, pawning & debit cards with more to come on the horizon. With the economy continuing to sputter and unemployment continuing to rise, there is a financial underclass that is developing in America that will need and use these services which will continue to spur growth for this industry.
Jennifer Streaks is a Financial Expert, Author & Pundit. Follow her on twitter @jstreaks or get more of her Money Tips at her website www.JenniferStreaks.com.
Fool blogger Jennifer Streaks does not own shares in any of the companies mentioned in this entry. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.