Cash Converters gets speeding ticket

It hasn’t been a good month for low-doc lending and second-hand goods trader Cash Converters International (ASX: CCV).

The stock has been a popular one amongst a number of small-cap fund managers and up until this month it looked like a good call with the shares touching an all-time high of $1.57 in April. It’s been all downhill since then with the company yesterday receiving a “please explain” from the stock exchange’s compliance arm as the company’s share price raced down to close at $1.02.

The concern for investors is the Consumer Credit Legislation Bill which came into force in March this year and brought with it certain regulatory changes. According to management, this has hurt Cash Converters’ near-term profitability as customers adjust to the changes, but longer-term management still sees a positive growth outlook.

Foolish takeaway

With the potential for further regulation of the ‘micro-lending’ sector, investors may find it safer to instead focus on companies that provide rental and purchase solutions to customers.

Silver Chef (ASX: SIV) is one such company. It has been a stellar performer in the past 12 months with its share price rocketing 116%. Silver Chef focuses on the long-term rental equipment market, particularly to the hospitality industry. FlexiGroup (ASX: FXL) meanwhile has key partner agreements with a number of national stores including Harvey Norman (ASX: HVN) for the provision of purchase finance.

In the market for high yielding ASX shares? Get “3 Stocks for the Great Dividend Boom” in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.