Pawn Shop Business Booming

Macro Economics | Stocks

Cash America (CSH), operator of about 500 pawn shops in the United States, today significantly increased their expectations for 2nd quarter earnings.

Pawn shops make money by lending money that is collateralized by the borrower’s personal possessions such as jewelry or a television.  If the borrower doesn’t pay, the pawn shop sells the collateral to recover their money.  They are also notorious for their high interest rates.

Cash America shares have taken off today, up 16%.  They still trade for only about 12.5 times management’s estimates for 2008 earnings, though.

I’ve been watching this stock for a long time and am disappointed I didn’t get in when I had the chance.

This is just the kind of countercyclical business that does well when the economy goes through hard times.

Disclosure: Top Gun has no position in Cash America (CSH) shares.

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