November 11, 2008: Take Stock In Education

As the old maxim goes,"Those who can't do, teach." In public schools, perhaps. But the private Educational Services sector has quietly become a good place to invest vs. almost all of the rest of the lousy market sectors worldwide.

After about two years of sharp business pullback, the operating performance of many for-profit educational institutions have started to recover. The slowing growth in the mid-30s age demographic, greater competition and closer regulatory scrutiny had caused a cleansing of less worthy institutions the past few years. Now, with higher unemployment translating into more time to re-tool and retrain, mature students (many with families and/or underemployed with set hours) enrolling in for-profit schools are beginning to translate into higher and more stable online clients gravitating towards student-friendly higher learning ports. Many for-profit institutions are placing greater emphasis on specific trades and other occupations, associate degrees and executive-friendly seminars. Although for-profit schools were having difficulty removing their teats from the nipple of sub-prime student loans, the above mentioned cleansing effect has forced schools to make curriculum relevant, flexible and distance-learning friendly. One instructor can teach a number of classes via computer, and auto-industry type unions that hamper public education are not a factor with the stocks that will be mentioned below. In addition, foreign for-profit schools, especially in China, have a bright future and achieve a high level of profit margin that has yet to be realised by investors.

Here are some stocks to explore in this sector:

EDU New Oriental and Technical Group/China (ADR)
STRA Strayer Education
NED Noah Education Holdings, LTD.
ESI ITT Educational Services
APOL Apollo Group
DV DeVry
LTRE Learning Tree International
CPLA Capella Education Company
LINC Lincoln Educational Services Corporation
CECO Career Education Corporation
COCO Corinthian Colleges
FC Franklin Covey
NLCI Noble Learning Communities
UTI Universal Technical Institute
REVU The Princeton Review
EDMC Educational Management Corporation
CEDU ChinaEdu Corporation (ADR)

Rarely are for-profit institutions at the top of an investment list. I am not recommending that you overweight your diversified portfolio with these or other education-centered securities. But you deserve a dunce cap for not doing your homework on for-profit schools. One or two may be appealing to even the average student.