The Newest Addition to My Portfolio

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread." -- Warren Buffett, Oct. 16, 2008

When Warren Buffett made the above statement, I was still buying stock. I bought stock all through 2008 and 2009 and expect to do so in 2010. Buffett also once famously boasted that he would be able to earn 50% annual returns ... but only if he had a whole lot less money. Why? Because he'd be able to freely buy and sell small stocks that the hotshots on Wall Street don't adequately cover.

With that in mind, I decided to buy back in to Advance America Cash Advance (AEA: NYSE). The Group's principal activity is to provide cash advance services in the United States. It offers prepaid debit cards, money transfer services and tax preparation services as an agent for third-party vendors and check cashing services at state authorized rates. The Group focuses primarily on providing cash advance services to middle-income working individuals. As of 31-Dec-2008, it operated 2,767 centers in 33 states in the United States, 20 centers in the United Kingdom and 10 centers in Canada, and had 79 limited licensees in the United Kingdom.


I held shares of AEA twice before and made a nice profit both times on the capital gains. My reason for buying back in this time is for the dividend yield of 4.04%. Their current price of $6.19 and earnings per share of $0.66 allow for continued payment of their current dividend while also fueling future growth. With a return on equity of 23.40% and very little debt, I'm thinking they are in a good position for some excellent growth. And it doesn't hurt that I will be earning over 4% in dividends along the way.