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

To: Jurgis Bekepuris who wrote (42660)	5/14/2011 2:56:58 AM
From: Shane M	Read Replies (1) \| Respond to of 78632

Calvin, and to piggyback on Jurgis's comments.... and I'm going entirely from memory here. late in 2010 the govt. produced a report of graduation rates that broke out graduation by individual campuses for many of the schools you're looking at. If you can find it it's an eye opener - some campuses having single digit graduation rates -- and some much much better - even comparable to public institutions. What was striking to me was even in schools run by the same company, some campuses seemed much better than others. another thing: tuition is ridiculous. I thought the for profits would have a cost advantage, but in most cases it seems students would be better to just find one of the lower cost state schools and go there. I'm not sure what dynamic is at work unless alot of the for-profit-school students just need something closer to home and/or can't get admitted to the state school. credit costs seemed high to me when I called around to soem local places just to get a feel for their programs. I was shocked at the cost actually.

To: Jurgis Bekepuris who wrote (42660)	5/16/2011 10:35:50 PM
From: Calvin_2011	Read Replies (2) \| Respond to of 78632

Re: for profit education The 20% drop of student enrollment in Strayer definitely warrants investigation. I can somehow understand the big drop of enrollment in Corinthian or Apollo, since these two have to change their marketing practice and drop certain student candidates to comply with the new rules. But based on what I read from Strayer's annual report, its business model should not be impacted too much. For example, it has never used any bonus or incentive scheme for its admission staffs, nor has it aggressively market itself in the past. And federal funding only takes about 78% of its revenue. (Source: Strayer 2010 shareholder annual letter) So, the big drop is a surprise to me. Strayer's management blames it on bad press. This might be the real cause, or not at all. I guess I will just have to wait and see the results from next a couple of quarters. (I assume that management might be able to use bad press as a reason for one quarterly results, but unlikely to keep using it for sequential quarterly results) When analyzing the for-profit education industry, one question I ask myself is what the industry would look like, if there were no government funding or if it were operating in a pure market economy environment. Do those players provide valuable services to the target customers? How much will the target customers be willing to pay for that service if they have to either pay out of their own savings or out of loan with a market interest rate? I think the services, which Corinthian provides such as training for message therapy,mechanical skills and other vocational trades, have a genuine demand in the society. In addition, those training programs are kind of difficult to be replicated online. (This is just my own assumption or speculation.) However, Corinthian's current business model is clearly not sustainable given changing regulatory environment and I imagine that the tuition would have to be a lot lower if the company were operating in a pure market economy environment. So my questions for Corinthian are: First will the company successfully adapt to the new environment? Second, during the adaption process, will the company sail smoothly? (i.e., not filing bankruptcy during the process first, then reemerge and be successful) Third, given all the information, how low the stock price should be to afford a margin of safety for a value investment? Calvin