SLM Holding Corp. (SLM) is the nation’s largest private provider and servicer of student loans. Before it was privatized 10 years ago, it was a government-sponsored entity known as Sallie Mae.
Student loans have come in for a lot of criticism lately, but they are still the fastest-growing segment of the consumer-finance industry. SLM has managed to stay above the fray, and does not participate in a lot of the practices that have brought scrutiny; it does not make loans to students at for-profit schools or vocational schools, for instance, and does not make high-risk loans. SLM is splitting into two parts later this year — one with the legacy-loan business, and one as a consumer-focused bank. This is a very undervalued company and this move should help unlock some hidden value.
I recommend buying SLM at current levels for a $26.50 target.
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