Is it still worth owning credit acceptance shares (CACC)?

RV Capital, an investment management firm, published its “Business Owners Fund” second quarter 2022 investor letter, a copy of which can be viewed here. The NAV of the Business Owner Fund was €600.80 as of June 30, 2022. The NAV decreased 40.2% from the start of the year and increased 505.5% from the start on September 30, 2008. compound annual growth rate since inception is 14.0%. Review the fund’s top 5 holdings to take a look at its best picks for 2022.

In its second quarter 2022 investor letter, RV Capital mentioned Credit Acceptance Corporation (NASDAQ:CACC) and explained his views for the company. Founded in 1972, Credit Acceptance Corporation (NASDAQ:CACC) is a Southfield, Michigan-based auto finance company with a market capitalization of $5.9 billion. Credit Acceptance Corporation (NASDAQ:CACC) returned -33.43% since the beginning of the year, while its 12-month return is down -26.40%. The stock closed at $457.80 per share on October 6, 2022.

Here’s what RV Capital has to say about Credit Acceptance Corporation (NASDAQ:CACC) in its Q2 2022 Investor Letter:

“At the beginning of the year, the five largest companies in the fund included credit acceptance. Our largest holding, both earlier this year and today, is Credit Acceptance, a lender for subprime borrowers to purchase a used car. I explained our reasons for investing in Credit Acceptance in my 2014 letter. I was very optimistic about investing at the time naturally, otherwise why else invest? But the investment has exceeded my high expectations. From 2014 through 2021, adjusted earnings per share grew 21.4%, 19.6%, 15.7%, 38.9%, 22.2%, 10.3% and 34.2%, respectively. This is the stuff investment dreams are made of: every year it ranged from good to fantastic.

Although the company’s operating performance was excellent, what drove earnings per share growth was the company’s willingness to buy back its own shares. At the time we invested, the company had 20.6 million shares outstanding. As of July 25 of this year, that number is 12.9m. This means that the company has not only greatly increased its earnings power, but our share of those earnings has increased by 60% over the holding period.

However, if you think that the investment has been a bed of roses, you would be wrong. I have lost count of the number of times the stock price has dropped 10%, 20% or more in a single day due to some news that supposedly hurt the value of the company. It’s a wonderful illustration of Ben Graham’s saying that in the short run the market is a voting machine and in the long run it’s a weighing machine…” (Click here for full text)

Our calculations show that Credit Acceptance Corporation (NASDAQ:CACC) fell short and did not make our list of The 30 most popular stocks among hedge funds. Credit Acceptance Corporation (NASDAQ:CACC) was in 23 hedge fund portfolios at the end of the second quarter of 2022, compared to 23 funds in the previous quarter. Credit Acceptance Corporation (NASDAQ:CACC) returned -12.00% over the last 3 months.

In May 2022, we also shared another hedge fund’s views on Credit Acceptance Corporation (NASDAQ:CACC) at another article. You can find other letters from hedge fund investors and prominent investors in our Hedge Fund Investor Letters 2022 Q2 page.

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Disclosure: none. This article was originally published on Insider Monkey.

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