Do any companies benefit from growing default rates? Yes, says Paul Tracy. "As the supply of bad consumer debt swells, those in the business of buying and collecting on those loans have a more plentiful (and cheaper) pool of debt at their disposal."
The editor of StreetAuthority Market Advisor states, "Portfolio Recovery Associates (NASDAQ: PRAA) is one of the most attractive players in this particular niche. I believe that the current credit environment is actually a major benefit for the firm."
He explains, "Recovery Associates' business model is simple. The company buys defaulted credit card, auto loan and other debts from lenders. Because this debt is in default, PRAA pays just a few pennies for each dollar of debt it purchases."
Tracy continues, "As long as PRAA can collect a few pennies more than it pays for the debt, the company makes a solid profit. And PRAA has been doing just that for years."
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