Hope all of you guys (and gals) had a good weekend, and I know we're all glad to come back to a bullish kickoff for the new week. The media is saying the rally is rooted in France's and Germany's vow to prop up Europe's banks. I say it's America's celebration of the fact that the Detroit Tigers are playing for the American League title for the first time since 2006. I guess it could be a little of both, however. Anyway, that's got nothing to do with the company I wanted to introduce you to today... perhaps one of the strangest story stocks out there, but one that also looks like it's time to bite into. First things first though - a quick look at some of the site's best new commentary. Is YRC Worldwide (YRCW) even a smidgen better off after the recent reorganization that pretty much destroyed prior shareholders? How to play gold and resources mining not through the miner's stocks, but through the lenders providing the funding. Now, about this company.... The Taxi Cab Business Isn't Cheap in New York To anyone not in the taxi cab business - which I presume is about 99% of us given there are only about 300,000 taxi drivers in the United States - the industry looks straight-forward enough: buy a car, paint it with vivid colors, install a meter, and off you go. And in some places, that's all there is to it. Leave it to New York to make it a much bigger process. The City of New York essentially regulates the number of taxi cabs on its streets by requiring each cab to have one of only a set number of 'medallions', or authorization to operate. Back in the 30's when the system started, the city government truly did issue medallions as proof of permission, and to this day you still see these medallions on taxi cabs. (Other major cities do it too, but none of the medallion markets are as intense as New York's.) As of the last count, there were about 13,237 medallions, meaning only 13,237 cabs are allowed to be in operation in the city. You know what that makes these medallions? A commodity. And like any commodity, they're bought and sold at fairly unregulated prices to the highest bidder. The bids are high too. Unbelievably high. Some of the bids for medallions this year - including the rare new ones that are issued - have ranged between $600,000 and $700,000. Yeah, you red that right... you've got to come up with more than half a million bucks to get into the taxi cab business in the Big Apple. I'm sure it's a great business to be in, but it's not like everybody's going to be able to get their hands on $600,000 to make it happen. The solution? Finance the purchase of the medallion. That's where today's company comes in. Medallion Financial Finances the Taxi Cab Business It's Medallion Financial Corp. (TAXI), and yes, they've built an entire lending business around New York's de facto taxi cab monopoly. It makes other types of loans too, but 2/3 of its loan portfolio is made up of medallion loans. For the prior quarter, Medallion Financial generated more than $7 million in interest income on a loan portfolio of $377 million, most of which ($312 million to be exact) were medallion loans. I don't want to go around quoting the company's loan rates, but when that $7 million is annualized, it becomes clear TAXI is able to charge premium rates. The company has earned $15.2 million in the last six months, which ain't bad for a market cap of $172 million. Annualized, that's a trailing P/E of 10.3. Now I know what you're thinking. I'd probably be thinking it too - any kind of lending right now is a liability, and the risk is just too great. And if this were real estate, I'd be 100% on board with you. After all, if a home buyer can't pay, the bank is stuck with a house it probably can't sell at fair value, if it can sell it at all. This isn't real estate though. These are taxi cab medallions, and strangely enough, may be one of the most marketable commodities on the planet. If Medallion Financial has to 'repo' a medallion, it can turn right around and sell it again at pretty much the same price. It's got to be one of the most unusual business arrangements in the world... a monopoly managed by a local government, a commodity that's never actually consumed, a barrier to entry that's insanely high for the average owner/operator, an unregulated trading market for the medallions, yet a regulated cab-fare market that's ultimately paying for them, and a well-managed financing of the whole thing (basically through one company). But hey - it works. Now, I'd like to say it was a bulletproof business that always grew the top and bottom line no matter what. I can't though. It's close to that, but not quite there. The years 2008 and 2009 were consecutively weaker, for instance, simply because loan rates fell from 7.0% to 6.0% during that time; a small rate change can have a surprisingly big impact, for better or worse. The other pitfall - no market growth. With only a set number of medallions out there, there's only a set number of possible loans to make. Still, as the price of medallions moves up (as it has every year since 2004), the size of the loans get bigger, and therefore more profitable. And here's the thing... this business is non-cyclical, and almost counter-cyclical. See, as the economy tightens and layoffs move higher, the demand for medallions actually increases because the supply of new drivers ramps up as ex-workers look for new employment. With TAXI (like everything else), Timing is Everything As far as the timing goes, I've been watching TAXI for a while now. It's been in consolidation mode since July, and has avoided the marketwide pullback. During that time it's also posted two quarterly revenue increases. More than that though, now we're starting to see a bullish divergence of the moving averages after the 200-day moving average line held up as support. It's almost like the bulls are testing the waters, and anything above the consolidation zone's ceiling at $10.00 could set off some fireworks. So, given what's apt to happen if and when the $10.00 mark is broken, I'd actually be more include to be in before then. It's one of those obscure companies and odd businesses that nobody ever thinks about, but is probably one of the most reliable plays out there right now. It pays a nice dividend of 7.6% too, which is almost more attractive than the growth potential here as New York's economy continues to recover and further presses the need for cab services. If fares go up, you can bet medallion prices will too. Is it a recession-themed play? Sure. Is it a growth-themed investment? Yep. It's one of the few names poised to do well no matter what happens next, which is something that's pretty rare at this point. Anyway, just something for you to chew on. I don't see us making it a full-blown Featured Stock, but I did think it's something you'd want to know about. We'll be following it for the long haul either way.