For-Profit Colleges Are Not At All Profitable Investments

• Want to recuperate some of the money you invested in your education? Thought you might profit from for-profit colleges? Think twice!
• Motif Investing constantly looks for “trends, ideas and world events that could create an investment opportunity,” and then picks 10 to 30 related stocks to build portfolios around, weighing them based on their exposure to the coinciding idea, event or trend.
• This article looks into a portfolio of companies that provide post-secondary education in the US, all of which have delivered negative returns over the past year.

The people behind the For-Profit Colleges motif explain why they built the portfolio.

Detention May Be Over

The experts note that the golden years of for-profit schools and vocational centers abruptly ended with the Great Recession; or so it seemed. The real-world economy was no longer able “to deliver on the promise of career advancement through more schooling.”

To make thinks worse for these companies, “Then came scrutiny from federal regulators, who focused on the mounting debt loads faced by graduates struggling to find jobs.”

These factors drove these schools’ stock prices down between 32 percent and 86 percent in the two years ending May 2013.

Related Link: How To Short The Global Economy Without Becoming A Short-Seller
However, Motif Investing adds, “a recent court ruling may have limited the government’s authority to regulate for-profit schools, thereby maintaining the availability of federal loans for students in these schools. And, if a recovering economy can spark increased enrollments, longer-term investors may consider pushing these stocks to the head of the class.”

Performance & Allocation

As noted above, for-profit colleges have not made up for profitable investments recently. Over the past month, this motif has lost 4.1 percent; over the past year, the portfolio’s value declined 28.7 percent. The chart below compares the motif’s performance with the S&P 500’s returns.

Let’s take a look at how this motif allocates its assets:

84.8 percent: General Education Providers

• 18.6 percent: Grand Canyon Education Inc LOPE
• 17.2 percent: DeVry Education Group Inc DV
• 15.2 percent: Graham Holdings Co GHC
• 13.1 percent: John Wiley & Sons Inc JW
• 11.0 percent: Apollo Education Group Inc APOL
• 6.9 percent: Strayer Education Inc STRA
• 1.9 percent: Career Education Corp. CECO
• 0.9 percent: ITT Educational Services, Inc. ESI

15.2 percent: Specialist Education Providers

• 6.8 percent: Capella Education Company CPLA
• 4.7 percent: American Public Education, Inc. APEI
• 3.7 percent: Tarena International Inc(ADR) TEDU