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Dear Mr. Berko:

Dear R.L.:

You need to make up your mind to change brokers. Your guy is living proof that evolution ain’t a one-way street and strengthens my belief that we are experiencing a dumbing down of America. World Acceptance Corp. (WRLD-$38.30) presents a much better opportunity than Student Loan Marketing, now SLM Corp. and commonly called Sallie Mae (SLM-$12.41).

SLM loans money to traditional state and community college students, too many of whom use that money for pizza, beer and grass. Sallie Mae also lends money to trade school students, wannabe phlebotomists, zinc miners, X-ray techs, neurosurgeons, beauticians, celery farmers and lorry drivers.

Last year, SLM originated $10 billion in student loans, a large block of which was overaggressive lending to numerous non-traditional trade schools. Still, the company earned a profit and will even earn a profit this year. But I don’t care a whit for SLM for these reasons:

(1) Management has been paying Anthony “Slick Tony” Terracciano $4.8 million in director’s fees for years. I wonder who in Congress Slick Tony paid for this sinecure. (2) SLM’s government sponsorship is at the mercy of Congress, and this is a tough budget year. (3) The lousy credit quality of SLM’s loan portfolio is concerning. (4) For years, SLM made government-guaranteed loans to anybody, and those loans are leveraged to the hilt. (5) Easy loans may be over, and SLM’s loans will be subject to normal credit checks.

SLM is quietly looking to be bought out by a large bank, but considering its worrisome sub-prime portfolio, there don’t seem to be any takers. Don’t touch the stock.

World Acceptance is a fast-growing small-cap business that has booked enormous success making small short-term loans to consumers who can’t borrow elsewhere. WRLD also offers tax preparation service, has a rent-to-own program, sells credit life, credit accident, health, credit property and unemployment insurance, and markets automobile club memberships. WRLD is a highly sophisticated pawnshop with 921 offices in 11 states, plus 65 branches in Mexico.

The heart of WRLD’s franchise is making small loans. The company’s loans are generally less than $2,000. This is a lucrative business with net profit margins last year of 17.2 percent. In the past three years, WRLD has tripled its business, adding 360 locations.

World Acceptance makes huge bucks servicing a profitable underground economy where traditional banks fear to tread. In 2009, WRLD earned $3.98 per share, and next year, the Street believes the company will earn $4.82 per share. In the next two years, the Street has a $52 price on WRLD.

I’d own 250 shares of WRLD over 800 shares of SLM on any day of the year including Sunday.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. © Copley News Service