Santander Consumer USA Inc. (NYSE:SC)

CAPS Rating: 1 out of 5 12.21

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jed71 (99.84)
Submitted July 25, 2016

I was 95% certain that this stock was going to dead cat bounce today or tomorrow, but I suspect that the news on this issue will not improve over the next year. I don’t mind taking a few points’ loss and waiting, especially with a company I think… More

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Recent Community Commentary

Read the most recent pitches from players about SC.

Recs

0
Member Avatar DarthMaul09 (29.09) Submitted: 8/14/2017 11:46:04 PM : Underperform Start Price: $12.91 SC Score: -33.46

Big exposure to sub-prime auto sales. The liar loans of the auto sector is unlikely to work out for them unless SC was able to obtain good insurance against defaults. Another risk is car leases that come to maturity and the residual value of the car is so low that the bank loses money anyway.

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Member Avatar RES7 (98.82) Submitted: 8/9/2016 6:55:24 PM : Underperform Start Price: $11.34 SC Score: -39.51

jed71

Recs

3
Member Avatar jed71 (99.84) Submitted: 7/25/2016 3:47:18 PM : Underperform Start Price: $10.58 SC Score: -50.02

I was 95% certain that this stock was going to dead cat bounce today or tomorrow, but I suspect that the news on this issue will not improve over the next year. I don’t mind taking a few points’ loss and waiting, especially with a company I think will head into the low single digits over the next year or two. This is an industry I know rather well, mostly because of my prior work history. And let me tell you, companies such as this nearly always have large numbers of Skeletons in the closet. And some of said Skeletons become the proverbial Walking Dead to both shareholders and executive management, arbitrarily biting, gnashing, and gnawing into the stock price.

This is the news that drew my attention to this stock:

“The Company is in discussions with its current and previous independent accountants regarding certain accounting matters, primarily related to the Company's discount accretion and credit loss allowance methodologies. The resolution of these matters may impact prior period financial statements and the timing of the filing of the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2016 (the "Form 10-Q").”

This is never good news. Jeffries, and some other sell side analysts are screaming, “Don’t worry! Everything is fine!” Call me skeptical that a subprime lender with audit and accounting problems is “fine”. (And where have I heard that before?)

This lender is what is termed a deep subprime lender with credit scores of borrowers falling in between 351 and 500 many times. For those not in the know, these are absolutely terrible scores, many times representing people with prior bankruptcies or credit histories where they effectively have never paid anything on time. I have been following the delinquency rates of this tranche of lending for quite some time and they have gotten considerably worse over the past year to year and a half. There was a recent report from Deutsche Bank that was showing that subprime auto loan ABS delinquencies have risen above 5%, which would be above the levels of the 2008-9 crisis.

My wild guess is that investors have been searching for yield in a big way, given the Fed has lowered the fed funds rate to be effectively zero. With the ten year T-bill paying only 1.5%, investors are pushing more heavily into risk assets in search of any way to generate income. It makes subprime auto ABS look all that more attractive with its 7-9% yield. The more of this ABS these companies sell, the more they try to lend to deep subprime borrowers with HUGE deliquency and default rates. Don’t be fooled – this stuff is dangerous beyond belief and I am frankly amazed we are headed down this same path yet again. Specifically, this company is in the dead center of what I think will be the next subprime auto loans mess. They might survive the next downturn, but it won’t be with a stock price greater than $5 a share.

Leaderboard

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Score Leader

bbbensphone

bbbensphone (87.32) Score: +56.63

The Score Leader is the player with the highest score across all their picks in SC.

Top
Pick
Member Name Member
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
Index
Gain
Score Commentary
bbbensphone 87.32 6/27/2016 Outperform 5Y $9.65 +89.38% +32.74% +56.63 0 Comment
Chemdawg 28.75 9/8/2015 Underperform 5Y $21.24 -13.94% +34.85% +48.79 1 Comment
GoDawsGo 49.77 3/9/2015 Underperform 5Y $22.47 -18.65% +27.88% +46.53 1 Comment
Prodders 62.58 6/27/2017 Outperform 5Y $12.21 +49.73% +9.17% +40.56 0 Comment
ziggystraw 99.56 11/23/2015 Underperform 5Y $17.52 +4.34% +26.88% +22.54 0 Comment
springdc < 20 10/23/2017 Outperform 5Y $15.35 +19.07% +3.18% +15.89 0 Comment
yaishkenielis 41.62 11/17/2017 Outperform 5Y $16.19 +12.91% +2.81% +10.10 0 Comment
muirmm 29.03 12/7/2016 Underperform 3Y $14.24 +28.33% +19.42% -8.91 0 Comment
acekeldog 99.63 9/22/2017 Underperform 3M $14.49 +26.12% +6.61% -19.51 0 Comment
tsperbeck 99.82 10/3/2016 Underperform 1Y $12.35 +47.98% +23.23% -24.75 0 Comment

Wall Street

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Player Name Player
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
S&P
Gain
Score End Date Commentary
TrackPiperJaff 85.05 8/30/2017 Outperform NS $14.12 +29.42% +8.51% +20.91 0 Comment
TrackBMOCapital < 20 3/4/2014 Outperform NS $26.00 -29.71% +42.25% -71.96 0 Comment

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