Five Education Stocks that Destroyed Your Career

Needless to say, it has been a disgusting year for for-profit education. Here are five for-profit education stocks that may have destroyed your career by annihilating your life savings this year: CECO, COCO, STRA, LOPE, and DV. After reaching record highs in 2008 and 2009, the for-profit education sector has done nothing but tumble downwards in 2010 and 2011. Strayer Education STRA, for example, is down from the $250s to the $90s. Corinthian Colleges is down over 85% from its highs. Career Education CECO isn't doing too much better, having lost three quarters of its stock price. And once commanding a stock price of over $90, Apollo Group APOL now sits around $45. Not good numbers, to say the least. To see why, an investor merely needs to pull up the latest earnings report from any of the companies. Corinthian Colleges' COCO last quarter was horrendous. Profitability was slashed, revenues were down, its CEO abruptly resigned, a chairman said the company needed "fresh leadership," and that was after the stock had already taken a beating from the news that its student placement rates had been exaggerated. Earlier this year, for-profit colleges were severely scrutinized for their high debt levels, aggressive recruitment practices, and "fisherman's tale" placement rates. Despite their glossy viewbooks and glitzy commercials, the reality of for-profit education degrees became clear in 2011: a degree carries a massive debt burden and few job prospects in today's economy. James Altucher, an outspoken critic of for-profit education, offered his explanation on the topic in his popular blog: "The problem is that college costs have risen 1000% in the past 30 years while healthcare has risen 700% and inflation has risen 'only' 300%. Colleges have made use of the myth that you can't get a job unless you have a college education." (Altucher, a successful venture capitalist and entrepreneur, suggests a wide variety of alternatives to college, including eight general suggestions.) Enrollment rates have slid off a cliff, and the costs of regulatory compliance have skyrocketed. Apollo Group, Corinthian Colleges, and Career Education have seen declines of 20-35% this year in new student enrollment. Without growth, every investor knows that a company does not deserve a high price-to-earnings (P/E) ratio. While Apple, Intel, and Netflix all have P/E ratios over 10, most for-profit education stocks have sunk below 5. This indicates that investors are willing to pay less for the future potential of these companies than more established (and higher-growth) tech stocks. Here is a list of the year-to-date performance of the for-profit education sector:

• Career Education: -66%
• Corinthian Colleges: -54%
• Strayer Education: -40%
• DeVry: -30%
• Apollo Group: +14%
• American Public Education: -1%
• Grand Canyon Education: -25%

This is what happens when investors realize what the U.S. Government Accountability Office knew last year: "Undercover tests at 15 for-profit colleges found that 4 colleges encouraged fraudulent practices and that all 15 made deceptive or otherwise questionable statements." One former admissions representative explained the reality of for-profit education: "I remember the training for the position. It was essentially training for a sales job. We learned sales techniques such as 'the seven-step sales process; and 'the cookie close.' We were told how enrolling a student was a psychological game." Well, investing is a psychological game, too. As the above numbers demonstrate, investors have stopped believing the sales pitch.