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The Winning Stock Idea from the Ira Sohn Conference

May 25, 2011 | About:
This year the first Ira Sohn Investment Contest took place at the Ira Sohn Convention. Here are some details:

· Participants submitted their best idea (long or short).

· The security had to have a market cap of over $1 billion.

· The winner was selected by a panel of judges for the “most compelling investment idea with a one-year horizon.”

· The judges for the contest were: Michael Price, Bill Ackman, David Einhorn, Joel Greenblatt, and Seth Klarman!

· The winner of the contest presented their idea.

Michael Price mentioned most of the ideas were long, mostly stocks. There were some shorts and credit ideas, and international ideas. He came down to 12 and then four finalists: General Motors (GM), GameStop Cor. (GME), (one other) and the winner.

Below is the winner of the contest and his stock pitch, Bridgepoint (BPI):

Sunjay Gorawara an undergraduate at the University of Indiana.

$1.8 billion market cap

Buying back 22% of flow

EV/EBITDA is 2.6x

With numbers like these, you are either thinking this is Apple (AAPL) with super-bullish estimates or a Chinese reverse merger.

The company is neither.

Bridgepoint has 99% of students attending online. Even though Steve Eisman is bearish on the business, there are a few good assets.

Company started in 2004 with 312 students and today has over 80,000.

Students can take courses that are six weeks, and accepts up to 98 credits. Most students are 35 year old, full-time working minority mothers.

Student reviews of the company have been very positive. I reached out to graduates of the college, through Facebook and Linkedin. I also looked at reviews of the college on various sites.

BA graduates had 17% salary increases.

Senator Tom Harkin said that 63% of students drop out. That number includes people who just signed up but never took a course. This does not make sense because those people never dropped out — they were never students!

If you look after one-year students the rate falls 38%. This rate is low considering the minority demographics. Compare this to other historically black colleges where the drop-out rate is 45%.

Bears also point out that Bridgepoint is accreditation shopping. However, they are merely changing locations.

Target price is $45 a share with 133% upside using 7x EBIT ratio. With 65% of float held short, there could be short squeeze. You can also lend shares at 12% to short sellers.

Disclosure: None

http://www.valuewalk.com/

About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

Visit Jacob Wolinsky's Website


Rating: 3.4/5 (14 votes)

Comments

kfh227
Kfh227 premium member - 2 years ago


Another education stock. Did the thesis include anything about risks. Any governmental intervention possible?
graemew
Graemew - 2 years ago
Jacob....please keep us informed as to whether any of the judging panel actually buy this stock in the future...voting it winner is one thing...actually buying it is another. I´ll just stick with my boring JNJ and PEP.
windplayer13
Windplayer13 - 2 years ago


Indiana University not University of Indiana

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