Tuesday, August 31, 2010

Not All Are True to Schools

Thanks to Will for passing this link along.

It's a schoolyard brawl that's leaving some of Wall Street's titans bruised and others thumping their chests.

The bull-bear clash is over for-profit education stocks, or publicly traded companies offering secondary education to students, many of whom rely on government financial assistance. Betting for or against the companies has led to some of the year's biggest gains and most painful losses.

On the "bull" side are well-known hedge funds such as Tiger Global Management LLC, Maverick Capital Ltd. and Lone Pine Capital LLC. Some have praised the companies, citing rising revenues as new groups of people, often adults, seek to improve their chances of getting a job through education.

Lately, though, several for-profit college operators have come under fire from government bodies who say the schools are pushing prospective students to take on heavy debt while failing to prepare them for careers that allow the students to pay off the loans. Stocks like those of Corinthian Colleges Inc., Apollo Group Inc. and Strayer Education Inc. have tumbled in recent months.

Warren Buffett's Berkshire Hathaway Inc. owns nearly 22% of the Class B shares of Washington Post Co. The company has seen operating income from its Kaplan education unit, which includes colleges, offset weakness from its media businesses. Washington Post shares also have fallen lately.

On the "bear" side of the bet are Steve Eisman, Jim Chanos and other investors who spotted past stock blowups. They have seen wagers against these companies lead to millions of dollars in gains lately. These big-name skeptics maintain that the troubles of for-profit colleges have just begun.


Related previous post: Steve Eisman's Ira Sohn Conference Presentation and Speech