Due to a weakening chart we cut back EZCORP (EZPW) from a 2.0% stake to what I call a holding position (0.1%) last Friday (Jan 16: Cutting Back EZCORP). Sometimes you get fortunate - the stock is down 8%+ today on a warning from competitor (and Cramer's pick in the space) Cash America (CSH). Now ....we did not like Cash America ourselves because it had a higher exposure to the cash advance business (rather than pawn shop) but it appears all these stocks are treated "the same" by the market, despite the different weightings of "cash advance" vs "pawn shop". Ironically EZCORP was one of the few stocks holding up yesterday.

A lot of this sounds Cash America specific but we are in baby thrown out with bathwater area here.... EZCORP bottomed out near the upper $11s in October 2008 (other than 1 day spike down) so that may be where it is headed. The stock is about $1 below where we sold it (currently in the $12.70s) so I'm going to wait this out... also I believe this market is prone to more downside after the obligatory dead cat bounce - so I'm just sitting on the sideline tapping my shoes. Further, we have earnings on the 22nd (tomorrow) so no reason to make a "bet" (and that's all it is) ahead of 50/50 proposition. If I had to guess however, I think the stock could be setting up for an upside surprise based on a solid earnings. Let's see what Cash America had to say...

• Payday lender Cash America International Inc (CSH) forecast a 15 percent drop in fourth-quarter net income, excluding certain items, as it has been hurt by lower cash advance revenue, and cut its 2009 earnings outlook.

• "Our transition to a new loan product in Ohio... proved more challenging than anticipated and led to a loss for our storefront cash advance business in the fourth quarter," Chief Executive Daniel Feehan said.

• Quarterly earnings were also hit by higher loss rates for the company's online cash advance product and heavier discounting on the retail sale of merchandise during the Christmas season.