Other Penny-Pinching Plays
As people are short on money, they occasionally need small loans that many traditional banks won’t make. Payday lenders like Cash America International (NYSE:CSH), however, offer unsecured, short-term loans with high interest rates. Such loans are popular among people earning below $40,000 annually and often are used to cover recurring expenses, according to a recent Pew study — and the need for such cash should remain steady as the number of low-income individuals does.
On the flip side of the debt coin, some people who take out loans might be unable to pay them thanks to their low income. Encore Capital Group (NASDAQ:ECPG), which is engaged in consumer debt buying and recovery and is up nearly 50% year-to-date, could thus continue to go strong.
It doesn’t end there. Companies like Rent-a-Center (NASDAQ:RCII) could see business increase — as it has over the last year by around 46% — as people try to save money by finding alternatives to buying. Not to mention, pawn shops like EZCORP (NASDAQ:EZPW) could boom. Pawn shops provide a quick way to turn old belongings into cash, which could come in handy for low-wage workers, though low gold prices have made them less popular of late.
If You’re Feeling Lucky
People won’t just be trying to get by, though — chances are, they’ll also be hoping they strike it rich. Recent studies have looked at households banking less than $13,000, which fall into this low-paying category by a landslide, to see how much of their annual income they spend on lottery tickets. Some found it was around 2% or 3%, while others cited upward of 9%.
If the number of people struggling to get by stays steady or worsens, lottery spending could have the same fate, too. Lottery sales have indeed been surging — “despite a struggling economy — or perhaps because of it,” as USA TODAY reported last year, when 41 states saw lottery sales grow, and nearly half of those set records for sales.
If you want to play this angle, though, you might be gambling just as much as those who play the actual lottery. Just look at one option: Scientific Games (NASDAQ:SGMS), a global supplier for lottery organizations.
SGMS was off around 15% Tuesday on the heels of a lackluster earnings report — the company’s revenues have increased for four consecutive quarters, but earnings haven’t been nearly as steady. The company reported a loss of 14 cents per share, while the Street expected 12 cents in profit. The company is attempting to reap profits by streamlining operations, though it’s still having mixed results from its overseas operations. Lottery as a trend might be on the upswing, it’s uncertain whether SGMS can regularly turn a profit off it — but its aggression toward expansion might make it worth a look.
As of writing this, Alyssa Oursler did not hold a position in any of the aforementioned securities.