There are three investment themes behind those debt numbers:
Stressed-Out Opportunity #1: The flipside of that explosive debt growth is to be a lender. Nobody likes to make loan payments, but I don’t know anybody who doesn’t like to receive them. Companies that are doing a lot of the lending are:
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SLM Corporation (SLM), also known as Sallie Mae
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Santander Consumer USA Holdings (SC), one of the largest auto lenders in the United States
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Capital One Financial Corp. (COF), one of the largest credit card issuers in the United States
Stressed-Out Opportunity #2: Cash-strapped consumers may not be spending as much as they used to… but they are selectively spending their dollars where they get the most bang for their bucks. I’m talking about discount retailers like:
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Wal-Mart Stores Inc. (WMT)
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Dollar General Corp. (DG)
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Costco Wholesale Corp. (COST)
Stressed-Out Opportunity #3: Debt collectors may rank up there with used-car salesman and IRS agents, but the business of debt collection is very lucrative. There are three publicly traded companies that derive the bulk of their revenue from debt collection:
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Asta Funding (ASFI)
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Encore Capital Group (ECPG)
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Portfolio Recovery Associates (PRAA)
I’m not suggesting you rush out and buy any of these stocks tomorrow morning. As always, timing is everything. However, the above are companies that could prosper from financially stressed-out consumers.
For more investment ideas, read the current issue of Yield Shark, which is being published today. As the stock of the month, I recommend an investment specializing in the luxury hotel and resort sector. As the 1 percent and the 99 percent keep drifting apart, it’s no coincidence that Walmart and top-notch hotels could both gain in popularity. Try Yield Shark risk-free for 90 days and find out how to profit from this trend.
Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics.
This article was originally published at Mauldin Economics.