There are many ways for investors to achieve impressive returns by focusing on financial services companies. Some of the top performing stocks of recent years have been those of financial services businesses that have carved out especially lucrative niches for themselves.
Certain indirect automotive lenders like Consumer Portfolio Services, for instance, have been setting records with their results. A look at that company’s investor relations website will reveal a long history of success and a well grounded business model.
An Approach to Lending That Stands Up Well in Any Environment
Some types of lenders are more vulnerable than others to adverse economic conditions. As a result, certain financial services stocks tend to suffer more damage when times become tough than others.
There are also lending business models that stand up better to challenging developments. Top performing indirect automotive lenders have proved to be especially resilient, with some even setting new revenue records in the midst of recessions.
As a result, investors who wish to not only produce impressive returns but preserve them when the going gets rough will generally do well to look into such equities. Doing so can easily help round out a portfolio that might otherwise be overly vulnerable to economic downturns.
The Value of a Simple, Proven Business Model
One of the features that makes this type of lending resistant to problems that often affect others is a business model that helps keep risks contained and manageable. Whereas other kinds of lenders might be directly exposed to the dangers that result from economic troubles, indirect lenders tend to be better insulated from them. Achieving that type of protection, in many cases, takes only excellence with regard to two core activities:
- Purchasing receivables. Instead of extending financing themselves, indirect automotive lenders buy loans from dealers who have issued them. These partnerships help protect lenders from the vagaries and threats typical of tough economic times.
- Securitization. After having amassed a suitable portfolio of receivables, an indirect lender will normally package them up so they can be used to back securities sold to investors. Once again, this strategy reduces risk for the lender in question.
These two tactics tend to guard indirect lenders from economic dangers that could easily undermine others. As a result, investors seeking a bit more safety and stability will often do well to consider their stocks.