Prescott General Partners LLC, a major holder of Credit Acceptance Corporation (CACC), recently added 4,000 shares. The buy increased the LLC’s stake by less than 1%, and came to a total cost of $1,784,530.
This marks the first insider buy at the company in over two years. Several company executives, including the COO and General Counsel, have been sellers of shares this year. Nearly all insider sales by executives have come following the exercise of stock options.
Overall, Credit Acceptance insiders own 31% of shares, and institutional investors own 66.2% of shares.
The credit services company for the automotive industry is down 2% over the past year, significantly underperforming the overall stock market.
Operationally, CACC has struggled over the past year, with revenues down 31% amid a slow market for auto credit services. But with interest rates declining, there may be a pickup in business in the quarters ahead.
Action to take: CACC shares now trade for 10 times forward earnings, and the stock has started to trend higher over the coming weeks.
The stock is a speculative play on lower interest rates keeping the economy, and therefore auto lending, strong. CACC does not pay a dividend.
For traders, the January 2025 $560 calls, last trading for about $6.50, could see high double-digit returns if shares stage a strong end-year rally.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.