Is Encore Capital (ECPG) A Smart Long-Term Buy?

Bernzott Capital Advisors, in their Q4 2020 investor letter, mentioned Encore Capital Group, Inc. (NASDAQ: ECPG) and emphasized their views on the company. Encore Capital Group, Inc. is a San Diego, California-based consumer banking company that currently has a $1.3 billion market capitalization. Since the beginning of the year, ECPG delivered a 4.49% return, while its 12-month gains are impressively up by 46.19%. As of March 23, 2021, the stock closed at $40.70 per share.

Here is what Bernzott Capital Advisors has to say about Encore Capital Group, Inc. in their Q4 2020 investor letter:

“Encore Capital Group (ECPG): A debt recovery business operating in the US and Europe, is positioned to benefit from an anticipated 2H rise in consumer delinquencies and lender charge-offs. This cycle has been unusual with government stimulus payments and forbearance programs forestalling typical economic rhythms. This has created short-term uncertainty for the company’s outlook and weighed on the valuation which, we believe, gives rise to the stock’s investment appeal with trends shifting in its favor. Other positives include recently crystallized CFPB collection guidelines, the company’s success reducing collection costs by use of digital channels, and its strong balance sheet ready to capitalize on an increase in supply of defaulted portfolios to purchase later in 2021.”

Our calculations show that Encore Capital Group, Inc. (NASDAQ: ECPG) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Encore Capital Group, Inc. was in 20 hedge fund portfolios. ECPG delivered an 8.39% return in the past 3 months.