Lookback: Tao Value’s 2019 Credit Acceptance Corp (CACC) Thesis

If you are looking for the best ideas for your portfolio you may want to consider some of Tao Value’s top stock picks. Tao Value, an investment management firm, is bullish on Credit Acceptance Corp (NASDAQ:CACC) stock. In its Q3 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Credit Acceptance Corp (NASDAQ:CACC) stock. Credit Acceptance Corp (NASDAQ:CACC) is a finance company.

On October 30, 2019, Tao Value had released its Q3 2019 investor letter. The investment firm said that Credit Acceptance Corp (NASDAQ:CACC) was one of the top 3 holdings in Q3 2019. The stock has posted a return of -28.8% in the trailing one year period, underperforming the S&P 500 Index which returned 15.8% in the same period. This suggests that the investment firm was wrong in its decision.

Tao Value fund posted a return of 1.26% in the third quarter of 2019, underperforming the S&P 500 Index which returned 1.87% in the same quarter. Let’s take a look at comments made by Tao Value about Credit Acceptance Corp (NASDAQ:CACC) in the Q3 2019 investor letter.

“Credit Acceptance (ticker: CACC) contributed -60 bps to the portfolio. I focus on its dealer productivity, which came in mixed in its Q2 results. For average volume per new dealers, I saw a positive 13% uptick (from 5.4 loans/dealers to 6.1) as the new signed dealers ramp up. However, existing dealers’ productivity deteriorated -9.6% (from 13.2 to 11.9 loans/dealer). Additionally, the management disclosed they will start to report more next quarter on the implementation of the new CECL (current expected credit loss) accounting standard. I think sell side’s obsession on CECL is overdone. After all, imprudent & dishonest lenders will always find ways to distort accounting regardless standard, while prudent & honest lenders will always report their own view of the real economy (usual non-GAAP) which their investors rely on for understanding the business performance. Thus, determining the lender’s integrity is the utmost important thing, and I see CACC as both prudent and honest.”

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Last month, we published an article revealing that Giverny Capital is bullish on Credit Acceptance Corp (NASDAQ:CACC) stock. The investment firm believes that the company has ample access to low-cost funding.

In Q2 2020, the number of bullish hedge fund positions on Credit Acceptance Corp (NASDAQ:CACC) stock increased by about 5% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in CACC’s growth potential. Our calculations showed that Credit Acceptance Corp (NASDAQ:CACC) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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Disclosure: None. This article is originally published at Insider Monkey.