Atlanticus Holdings Stock Forecast: Holding companies are an interesting – and often unexplored – area of business. That’s a shame, because they offer attractive benefits for investors. Essentially, holding companies exist for the purpose of buying and controlling other companies.
In some cases, they are parent to wholly owned subsidiaries. In other cases, they purchase enough voting stock in other companies to set the direction when it comes to management, strategy, and general policies.
Holding companies own the assets of other organizations, and they actively participate in big-picture decisions. However, day-to-day operations are left to the subsidiary organizations’ leaders. The biggest benefit of this structure is protection from liability. If a subsidiary business goes bankrupt, the holding company is not responsible for those debts.
One of the main reasons well-managed holding companies are a good investment is that they have a greater ability to flex and adapt to the marketplace than do the subsidiaries actually making goods and delivering services. Holding companies can rapidly buy into growing industries, and they can sell off their interests in declining industries just as quickly.
In investor circles, one of the best-known holding companies is Berkshire Hathaway. Its Chairman and CEO Warren Buffet is the third wealthiest person in the world. His massive wealth is primarily a result of his unparalleled success as an investor. This holding company manages hundreds of global businesses, and it consistently returns substantial value to its shareholders.
Of course, Berkshire Hathaway [NYSE: BRK.A] is just one of many successful holding companies, and there are plenty of other options for investors interested in this area of business. Atlanticus Holdings presents itself as a promising opportunity – but is Atlanticus Holdings really a buy?
What Does Atlanticus Holdings Do?
As mentioned, holding companies don’t exactly “do” anything. They exist to control other businesses that produce goods and services. With that said, Atlanticus Holdings’ purpose is to create value through investment in and control of financial services companies.
Atlanticus [NYSE: ATLC] was founded in 1996, and it has always focused on the financial services industry. It leans towards non-traditional financial solutions for underserved markets – the sorts of consumers who can’t get funding through major banks and financial institutions.
Experience is critical to success in this industry, and Atlanticus has it. Over the course of the company’s 20 year history, Atlanticus brands have helped more than 17 million customers with upwards of $25 billion in loans. Products include credit for retail purchases, an unsecured Mastercard, and a variety of loan solutions tailored to fit unique consumer needs.
Atlanticus differentiates itself through advanced technology that offers consumers a high-quality experience. They enjoy the same paperless applications, instant decisions, and digital account management offered by leading financial institutions.
Atlanticus leverages proprietary analytics to support banking partners, increasing the success of its lending programs. These combined strengths make Atlanticus an attractive ally for partner organizations.
All of these assets may be popular with consumers, but do they generate shareholder value? In other words, is Atlanticus Holdings a buy? What is the Atlanticus Holdings Stock Forecast?
Atlanticus Holdings by the Numbers
For the moment, Atlanticus [NYSE: ATLC] isn’t at the top of anyone’s buy list.
While the company had a reasonably good 2018 and a better 2019, previous years ended in the red. Net income for 2015 was $1.713 million, but 2016 came in at a loss of ($6.335) million.
In 2017, the loss was substantially higher, totaling ($40.781) million. It wasn’t until 2018 that Atlanticus turned the corner, bringing in a net income of $7.856 million.
Through the third quarter of 2019, net income is looking better, with the company reporting income of $24.034 million. This drove stock prices up a bit, and current shareholders appear optimistic.
The question for those who are considering adding Atlanticus to their portfolios is whether the company will continue to grow its profits and generate value for shareholders. Is now the right time to buy Atlanticus stock?
Is Atlanticus Holdings a Buy?
While investors appear to be hopeful about the future of Atlanticus [NYSE: ATLC], analysts don’t share their enthusiasm. Most haven’t bothered to look at Atlanticus at all, and those who have are making dire predictions.
Stock prices are expected to go down between 50 percent and 60 percent in the coming year, and the general recommendation is to sell off any shares you currently own. Basically, those who are considering investment in holding companies are encouraged to look elsewhere.
Fortunately, you don’t have to look far to find strong holding companies that are expected to grow their profits. These are two good options for long-term or buy-and-hold investment strategies:
- Xcel Energy is a utility holding company that controls four midwestern electric companies. Xcel Energy’s annual dividend yield payout is 2.7 percent, and its five-year return is 129 percent. Compare that to the S&P 500 index, which has returned 68 percent in the same period, and it is easy to see why this one is a buy.
- Markel is a financial services holding company that knows how to turn a profit. It’s leadership actively manages investments, ensuring top returns. Markel has a portfolio of specialty insurance businesses that consistently show high returns. Better yet, it continues to acquire new businesses and turn them into winners. The main downside to Markel is its high per-share price. At well over $1,000 per share, this stock isn’t for everyone.
Learn more about investing in holding companies from the experts at Financhill – where many of the world’s smartest investors go for information.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.