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Sally Jones
Sally Jones
Articles (580) 

Guru Behaviors Differ - Encore Buys AACC

April 26, 2013 | About:

No two Guru investors think alike. On any given day and with any given stock, one is selling as the other is buying. Watching from the sidelines, we want to close that gap or at least understand how two great Guru investors can have opposing views.

A case in point is the recent trading activity on Asset Acceptance Capital Corporation (AACC) with David Nierenberg reducing again while First Eagle Investment Management is buying new. Nearing acquisition by the larger Encore Capital Group Inc. (NASDAQ:ECPG), another debt buyer-debt collector rival, Asset Acceptance shows major warning signs according to a GuruFocus financial checkup, but the company is up 22% over 12 months. Encore’s acquisition of Asset Acceptance Capital is expected to be completed in this quarter.

David Nierenberg of D3 Family of Funds reduced his position again with Asset Acceptance Capital Corporation (AACC) by 0.13%, as of April 23, 2013. Nierenberg traded at an average price of $6.49, with a 0% change from average. D3 Family of funds holds 4,370,529 shares after the trade.

This is the second AACC paring by D3 Family of Funds this month. Nierenberg reduced his AACC position by 8.4%, as of April 16, 2013, trading at an average price of $6.48, with a 0% change from average.

As Nierenberg reduces his position with the debt-collector on the brink of a merger, First Eagle Investment Management bought the new holding as of March 31, 2013. First Eagle bought 399,283 AACC shares for an average price of $5.52, making a 17.6% gain.

Earlier this month Asset Acceptance Capital Corporation, (AACC) agreed to the $200 million offer made by its competitor Encore Capital Group (NASDAQ:ECPG). Together, the companies have purchased over 60 million consumer accounts with a face value of approximately $130 billion.

On Fortune’s 2012 List of “100 Fastest Growing Companies,” Encore Capital Group is a debt management and recovery solutions company for consumers and property owners across a broad range of assets. Encore employs 2,400 people worldwide and a large third-party network, with operations in the U.S., India and Costa Rica.

Encore's President and CEO Brandon Black commented on the upcoming deal: "This acquisition moves our industry into a new phase of maturity defined by more efficient companies that are committed to operating ethically and treating consumers with respect. Encore's strong operating and cost advantages will allow Asset Acceptance's investments to be significantly more profitable and will deliver greater value to shareholders.”

Promoting consumer financial recovery and ethical collections, Encore has a reputation for its industry-leading Consumer Bill of Rights offered to millions of people repaying their obligations and getting a new start financially.

Encore Capital Group Inc. (NASDAQ:ECPG) has a market cap of $642.7 million, with a P/E of 9.9, a P/B of 1.6 and a P/S ratio of 1.3. ECPG is up 19% over 12 months. The current share price is $28.20.

Asset Acceptance Capital Corporation (AACC) has a market cap of $199.7 million, with a P/E of 18.1, a P/B of 1.3 and a P/S ratio of 0.8882. AACC is up 35% from January. The current share price is $6.49.

Guru David Nierenberg is the founder of D3 Family of Funds. His updated portfolio lists seven stocks with a total value of $147 million and a quarter-over-quarter turnover of 0%.

First Eagle Investment’s Jean-Marie Eveillard is one of the most respected investors in the world. He was Morningstar's International Manager of the Year in 2001. He also received a Lifetime Achievement Award from Morningstar in 2003 for “building one of the most successful long-term records in the investment business.”

Here is the complete portfolio of First Eagle Investment Management.

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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

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