The US economy has seen a sometimes sluggish, but steady recovery from the depths of the Great Recession. Thankfully, as credit becomes more readily available, consumer spending should continue to tick up. This was recently witnessed with reports of a record 15.7 million new vehicles sold in 2015 and continued record sales continuing through February of this year.
US Bancorp (NYSE:USB) Receives A+ Credit Rating
Last week US Bancorp (USB) received the results of its financial colonoscopy from Morningstar with a 4-star stock rating and an A+ credit rating. This is fantastic news for the 6th largest bank in the United States with $355 billion in assets, although yesterday the stock was trading down by 0.23% at $39.76 in afterhours trading.
This is especially surprising considering that US Bank’s CEO saw a 40% decrease in earned income in 2015 due to changes in his deferred compensation package. Normally the street is excited when executive pay is trimmed without sacrificing performance. In addition, the bank was recognized as one of the World’s Most Ethical Companies by Ethisphere for the second year in a row. Again, ethics and executive pay cuts should be exciting for a company with a solid credit rating. It may be that US Bank’s stock has been caught in a short-term correction having nothing to do with their individual performance, although only time will tell.
Availability of Credit Helps Stimulate US Economy
As many Americans enjoy the increased availability of credit, something surprising happened in January of this year. US consumer borrowing only grew at 3.6% in the first month of this year according to reports. That’s the lowest rate of growth we’ve seen since March of 2013. Many fear that market frustrations may be to blame, pointing to volatile oil prices and some off-the-wall reports that we’re experiencing an emotional correction in the markets.
Cash America (CSH), First Cash Financial Services (FCFS) Among Market Winners
However, on the whole, increased consumer confidence has widely been buttressed by ever-increasing access to financing (see boom in auto industry above). Even the best payday loans without credit checks have started popping up again with fervor; more than 12 million Americans take advantage of the lucrative lending option every year.
First Cash Financial Services (FCFS), based in Arlington, TX, operates more than 1000 pawn shops and financial service centers. They’re up more than 6% year to date with a market cap of 1.28 billion. The majority of analysts agree that it is currently a hold rating with a target share price of $44.
Cash America (CSH) is also up over 6% year to date with a market cap of 914.93 million. Morgan Stanley (NYSE:MS) recently upped its holdings in the payday lender by 100% to $5,381,000. Their most recent quarterly earnings beat analyst estimates, sitting at $0.55 per share.
The multitude of institutional investors taking positions in payday lenders is evidence that consumer credit of all shapes and sizes is steadily expanding. The fears in the financial sector that resulted from the Fed rate hike have been greatly overcome, as the hike has already occurred and markets fared reasonably well. Warren Buffett continues to take a bullish stance on the financial services sector and the broader US economy. Of course, individual performers vary, so don’t take a bullish outlook on the sector as an endorsement of every stock in the financial services category.
Overall, the economy is doing well. The stock market is experiencing some corrections, but take stock in the strength of the market with market titans buying back their own stock; taking full advantage of the corrections – signaling that we’re not headed into another recession.