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Back-To-School: Education Sector, 3 Gurus Hold CECO

September 09, 2013 | About:
Sally Jones

Sally Jones

49 followers
In the back-to-school flurry, here’s a look at the education sector in the U.S. If there is any good news in the education sector, it’s the increasing demand for androids. The demand to digitize educational content in schools and universities has resulted in a 103% increase year-over-year in 2012. The share of electronic tablets rose from 19.4% in 2011 to more than 35% in 2012 in the education device market, according to the Boston Globe.

But according to the ratings agency Moody’s, the outlook for the U.S. higher education sector in 2013 is negative, due to increasing financial pressures on university revenue sources. According to Eva Bogaty, the Moody's Assistant Vice President, “Even market-leading universities with diversified revenue streams are facing diminished prospects for revenue growth.” According to the Moody’s report issued in January 2013, the education sector is down because family income and net worth have dropped, and there are fewer high school graduates. Additionally, non-tuition revenue sources have also pulled back, suffering from economic conditions. Rising student loan default is also a burden on universities, as well as negative accreditation actions significantly on the rise. According to Moody’s, even though universities have withstood the 2008 market reverberations, many are just now beginning to examine their cost structures.

Here’s a highlight from the education sector; a company held by three billionaires:

Career Education Corporation (CECO)

Down 25% over 12 months, CECO has a market cap of $176.43 million, and trades at a P/B of 0.30. The current CECO share price is $2.64

Career Education Corporation (CECO) is a provider of private, for-profit, post secondary education in the U.S. and Europe, and also has a presence in online education. The company has 95 schools in 23 states and five countries, offering 100 programs.

In early August, Career Education Corporation reported total revenue of $294.8 million, and a net loss of $31.4 million, or -$0.47 per diluted share, for the second quarter of 2013 compared to total revenue of $365.9 million and net loss of $100.2 million, or -$1.52 per diluted share, for the second quarter of 2012.

“Our results are very much in line with our initial projections for the quarter. We are actively taking costs out of the business as we become more efficient and adjust the organization’s size to serve a smaller overall student population,” said Scott W. Steffey, president and CEO of Career Education, in a company press release.

Amid legal issues and controversy, Career Education Corporation (CECO) has weathered cash flow problems and decreasing enrollment. The company’s 10% owner continues to reduce his position. Here are the details.

Guru Action: The top Guru stakeholder and 10% owner Richard Blum of Blum Capital Partners, has made 22 reductions to his CECO position in 2013 so far. Blum now holds 9.61% of shares outstanding, translating to 6,446,343 shares after his latest reduction as of September 6, 2013 when he unloaded another 6.7% of his holding, selling 430,000 shares at a trade price of $2.61. Blum has averaged a loss of 85% on 5,799,470 shares bought at an average price of $17.91 per share over his five-year history, and on shares sold, lost 63% on 8,511,197 shares sold at an average price of $7.08 per share. The only gain in the entire trading history occurred in the second quarter of 2013 when Blum sold 2,819,783 shares at an average price of $2.61 per share, gaining 1.1%.

With 3.52% of shares outstanding, Guru Jim Simons holds 2,359,262 CECO shares as of June 30, 2013 when he increased his position by 5.58%, buying 124,700 shares at an average price of $2.61 per share. His five-year trading history also shows a solid losing streaking average a loss of 84 – 89% on shares bought and sold. Like Blum, Simons made a 1.1% gain, his only gain, in the second quarter of 2013 when he bought 124,700 shares at an average price of $2.61 per share.

Chuck Royce is the third Guru stakeholder with 31,600 shares which earned him a gain of 1.1% in the second quarter of 2013. Check here for more trading details.

Historical share pricing, revenue and net income:

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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

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