World Acceptance Corp. (WRLD)

This is a risky red thumb because (a) WRLD's cash flows are spectacular and (b) the case against them requires the Federal government to act in order to stop usurious and predatory lending practices. All the same, I agree with Citron that at some point, the Feds enact legislation that will shut WRLD down and that, even if they don't, WRLD is using shady accounting practices in order to hide their bad loan expenses.

Do you seriously believe that a lender that gives out "non-payday" loans with rates upwards of 80%+ marketed at the lowest income individuals truly should have a provision for loan losses at about only 5% of their total loan portfolio? There are legitimate (but poorly run) banks that have losses higher than that right now!

For a much more in-depth case against WRLD, see Citron:

http://www.citronresearch.com/index.php/2009/09/17/

I've been reluctant to red thumb this for months just because, on the face of it, the company would appear very undervalued in relation to its cash flow production. I don't like red thumbing unless I feel absolutely sure a company is overvalued. But really ... this is just ridiculous. There are all kinds of red flags throughout their financial statements (including a constantly rising receivables balance) and this company is really skirting around the edges of legality to begin with. I don't really care about gaining points on this pick so much as I do this thing getting shut down once and for all. It's ridiculous in a country that is supposedly as developed as America, companies like this can operate legally.

Good numbers. Year over year growth in earnings, good return on equity, good price/cash flow, etc. Citron is not the only opinion out there: http://seekingalpha.com/article/163113-world-acceptance-has-the-goods-citron-doesn-t