Who benefits from loan delinquencies? Just Asset Acceptance Capital (AACC)

Asset Acceptance Capital Corp. (NASDAQ:AACC) a leading purchaser and collector of charged-off consumer debt is one of the few financial companies that stands to gain in the coming months.  AACC, the Official Wall Street Shylock.

Okay, Shylock is a bit much, but they are in the debt collection business for a profit. Asset acceptance is a buyer of defaults (INAUDIBLE) consumer (INAUDIBLE) from credit card companies like American Express and Capital One. The company basically acquires the portfolios at deep discounts and then goes about their business by collecting upon those defaulted securities. Right now there is a huge supply of those defaulted portfolios on the market and that's driving prices down and returns up for asset acceptance over the next year or two.

AACC just blew it on their earnings call this week, Q2 profit declined 74.3% and they missed their estimate.

Tuesday reported a 74.3% decline in profit for the second quarter, as revenues decreased 14.3% year over year. Earnings missed the estimate of Street analysts.

The Warren, Michigan-headquartered company's second-quarter net income was $2.1 million, or $0.07 per share, compared to net income of $8.3 million, or $0.24 per share, in the second quarter of 2007. Seven analysts polled by First Call/Thomson Financial expected the company to earn $0.19 per share for the quarter.

Adjusted EBITDA for the quarter rose to $46.7 million from $45.2 million in the same period of the prior year.

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Total revenues declined 14.3% to $56.5 million from $65.9 million in the second quarter of 2007. Analysts were expecting $64.39 million for the quarter.

For the first six months, net income declined to $8.9 million or $0.29 per share from $18.1 million or $0.53 per share in the same period of the previous year.

Total revenues for the period decreased to $120.8 million from $133.2 million in the first half of 2007.

Adjusted EBITDA for the first half of 2008 increased to $98.8 million from $91.4 million in the corresponding period a year ago.

AACC ended Tuesday's regular trading on Nasdaq at $10.64, down $0.69 or 6.09% on a volume of 432 thousand shares. In after-hours trading, the share prices moved further to $10.58.

Besides blowing the quarter, AACC is being held down by a 29% short float, but with a business model that is going to work out for a failing economy, its time to add AACC to your watch list.

Discliamer: No positions in any of the securities mentioned in this publication.