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Education Stocks In The Age Of Trump

As we know, shares of for-profit education companies suffered mightily in light of the crises and allegations regarding low-quality education, poor student outcomes, high-pressure salesmanship, ill-conceived lending, and eventual regulatory crackdowns. Some former industry mainstays have been shuttered. But times may change. It’s not just that Trump himself has regulation-cutting sentiments and has had past involvement in the business. It’s that this was always an important area calling for the solving of problems, not carpet bombing of the industry. So it may be worthwhile to look at some promising education stocks.

In this Thursday, Sept. 10. 2009 photo, Brenda Combs, now a doctorate student at Grand Canyon University and ambassador of inspiration and achievement for the school, smiles about her present but remembers her homeless and drug addicted past in Phoenix. (AP Photo/Ross D. Franklin)

Screen Selections

On Jan. 30, I presented a screen I created in response to the pro-everyman mega-trends I believe will take hold based on the themes discussed in President Trump’s inaugural speech. I don’t predict Trump will or won’t succeed. I do predict things will move John and Jane Doe’s way whether it’s done through the efforts of Trump, Congress or a whole bunch of new people voted in down the road in both branches of government. Of the 20 stocks I presented, two were in the area of for-profit education; DeVry Education Group (DV) and Grand Canyon Education (LOPE).

This “Business” Has to Work

My conviction regarding stocks like this lies in my belief that the business as a whole will work because it has to work, because it had darn well better work.

I don’t say this as an apologist for Trump University. In fact, before that former enterprise made big headlines, I went ballistic when my wife signed up for a free real-estate workshop offered by another outfit and I explained why she should run fast and run far from things like that (she listened and was a no-show).

Instead, I cite the January 14, 2017 issue of The Economist, which made “Lifelong learning” the week’s cover topic. In that edition’s Leader’s section, the magazine observed--correctly I believe--that the “classic model of education--a burst at the start and top-ups through company training--is breaking down.” No matter what one studies, no matter what skills one takes into the work force, no matter what dreams, aptitudes, etc. drive us, there is one thing we can be pretty sure of: It won’t get them through life, not even close.

The world evolves; that’s been much written about. Less widely discussed, but equally important, is that people evolve. Heck, I work today in a field I didn’t know existed when I got out of law school. No matter who we are, we all have to be students during our lives, and we will do that. And the education system will eventually have no choice but to evolve. I don’t know that the for-profit education companies, including the ones on which I’m focusing today, have all the answers. Nor am I even sure the MOOCs (massive online open courses) have it just right. But I do believe that the latter are at least closer than traditional public education and are at least moving in the right direction, albeit not always smoothly.

Reports of abuse among for-profit colleges have been plentiful, alarming and amply documented. But in contrast to the apparent views of some, I do not see this as a clarion call for destruction of the sector any more than early abuses in the manufacturing sector (filthy, unsafe conditions, onerous working hours, child labor, etc.) were a call for cancellation of the industrial revolution.

See problems. Fix problems. We’ve done that before. I think we’ll do it again with education. For investors, I’ll expand it a bit: See problems. Fix problems. Own shares of companies likely to be part of the...