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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (42634)	5/13/2011 10:52:46 PM
From: Mark Marcellus	Respond to of 78630

why do you think a stock like STRA trading at ~14X forward earnings in an industry that is under the gun and depending on public funding is attractive. First, the downwardly revised forward estimates are lower than CY earnings. Not a great thing, but unless the whole industry is doomed, it's a short term blip. I also think those estimates, especially for 2012, are on the low side. That aside, 14x is not hugely expensive. If you look at Strayer's current size and the room they have to grow, there is plenty of potential upside. Meanwhile, I'm collecting a better than 2% dividend that is very secure (~33% payout ratio). As for the future of the industry: - There is huge demand for what these companies are offering. The number of working adults, their target market, that do not have a college degree is staggering. - The public institutions that are their competitors, especially the Community Colleges, are being hit even harder by the cutbacks. - Public funding is not going to dry up. The education benefits for the military, in particular, are not going anywhere. STRA is run by ex military people, and returning military and military spouses are one of their prime markets. That said, my value style has management quality as a major component, and I'll pay up for it. If your strategy is to make a basket play in a beaten down sector without getting too deep into the individual companies, the answer is different. COCO and APOL belong in that basket, STRA probably doesn't.