We've been expecting this: The for-profit educators are starting to crack. Strayer Education yesterday announced a 28% increase in earnings, a penny above estimates. Revenue jumped 28% to $114.3 million on higher enrollment and tuition fees. But shares dropped 18% after the company projected first-quarter earnings per share of $1.96 to $1.98 – below analyst estimates of $1.99. New Oriental Education, the largest private educator in China, cut revenue projections for the third quarter... shares tumbled 23% to a two-year low.
Why have we been bearish on the for-hire teachers? Analysts typically view these stocks as defensive, countercyclical plays in a down economy. More adults are likely to enroll to improve job prospects, so the pitch goes. But most of the revenue for these stocks comes from student loans – which are much harder to get than they were last year. We see the pay-for-teachers companies as one of the main beneficiaries of the credit bubble. Our bet is people start going back to cheaper community colleges. Like Jim Chanos says: "Outcomes at these for-profit educators are not much better than the average community college, which is free."
Be sure to check out The Daily Crux today to learn 12 reasons to short gold... where to find safe 11% dividends... what stocks master value investor Jean-Marie Eveillard recently added to his portfolio... what the 10 worst, large cities in America are... and which toymaker is currently enjoying a huge rally in sales... Also, if you haven't already received our interview with expert gold coin and collectibles investor Van Simmons, click here to do so – it's completely free. In the interview, Van tells readers which eight coins are the best buys right now. He also talks about a little-known coin that could possibly increase in value 28 times.
Sometimes the best advice we can give our subscribers isn't what to buy, but what not to buy. You might recall last November, a Growth Stock Wire reader asked why royalty trust prices were sinking, even though some were paying out dividends as high as 20%. We put the question to our oil and gas expert, geologist Matt Badiali:
Since June, Canadian Oil Sands, Penn West Energy, and Enerplus Resources – three of the biggest royalty trusts – have fallen an average 54%. Now the three yield an eye-popping 19.5%. I don't think that's a bargain, I think it's a warning. Earnings are headed down. And since dividends ebb and flow with earnings, dividends are about to tank, too.– from the November 2006 Growth Stock Wire
Since then, both Penn West and Enerplus cut distributions by at least 30%. Canadian Oil Sands Trust cut its dividend by a whopping 84%. Canadian Oil Sands Trust went from an apparent yield of 22% on January 22 to 3.5% on January 28.
Nobody asked me, but my bet is oil and gas prices go far lower and stay down for far longer than anyone expects...
Last week in DailyWealth, Doc Eifrig told readers how to get 60% off meals at local restaurants. While researching for his new service, Retirement Millionaire, he discovered a little-known website, www.restaurant.com, that offers $100 gift certificates to literally thousands of restaurants for only $40. And for the next three days, you can get an additional 60% off a $100 coupon... You're only paying $16 for $100 of food. After adding a gift certificate to your cart, enter the code "TREAT" in the "enter discount code" box in the upper right hand before checking out. Eifrig's service, Retirement Millionaire, is filled with lots of tricks like this (including how to get paid to own gold and how to take a vacation at one-tenth the retail price) that guarantee you a happier and wealthier retirement. To learn about the other money-saving tips Eifrig has discovered, click here...
New highs: Our short of Capital One (COF).
In the mailbag... questions about gold and silver... and the real role of regulators. Send your comments here: feedback@stansberryresearch.com.
"Yes, I have plenty, hopefully not too much precious metal. However, your friends over at The Oxford Club says now is the time to short gold. Any comment?" – Anonymous
Porter comment: Our own super-trader, Jeff Clark, says a pullback in gold is likely, too. Gold has become awfully popular and, as you know, when any asset becomes very popular, that's usually a sign of a top. On the other hand, sometimes market fundamentals overpower market sentiment. I wouldn't be surprised if this is one of those times.
As for me, I'd never trade gold. Not that you can't or shouldn't trade gold. But for me, gold is simply the ultimate store of value. I buy as much as I can afford each year. I put it somewhere very safe. I forget about it. Some years, I might pay too much. Some years, I've definitely gotten a great value. But it hardly matters, because I'm committed to a lifetime pattern of purchasing and I will never sell. My bet is my gold investing alone will make me a wealthy man over the course of my life. The world's paper currencies are constantly devalued by the politicians who run them – it has always been this way, it will always be this way. It is part of human nature. Never forget this: The central truth of economics is scarcity. There will never be enough of anything to satisfy everyone. But successful politicians must promise everything to everyone. Paper money is the bridge between economics and politics. It's a bridge that cannot stand for long.
"First, I'd like to compliment you all on the great value you are providing with your various newsletters, and especially now with The Daily Crux. I love it! As far as another great investment idea I am looking at that I believe may end up performing as well or better than gold – high quality firearms, including assault rifles. There is no doubt the Obama Administration will at some point move to infringe on the 2nd Amendment rights of Amerikans. I see this as owning a functional hard asset that will appreciate in value simply due to supply & demand forces. There will be decreased supply due to the liberal left's legislative efforts, and increased demand as more people seek to protect themselves from what will likely be an exponential increase in violent crimes across the country as more people lose their jobs and homes, and State and local budget cuts result in an inadequate law enforcement presence. I have purchased a large, high quality fire-proof gun vault in which to store my gold and silver along with a healthy assortment of high quality firearms that are likely to end up on Obama's banned list soon. Anyway... that's my 2 cents...and keep up the good work." – Paid-up subscriber Vince W.
Porter comment: It's a lot more difficult to smuggle guns out of the country than gold (or so we're told)... On the other had, it's awfully hard to take out a wild turkey with a gold coin.
"If Porter Stansberry and his small team of associates are able to figure out GM is going to go bankrupt back in 2007, Freddie Mac and Fannie Mae are in the pits, and Gannett Corporation is another bankrupt candidate, I don't see why 100 regulators should not be a sufficient number to examine the books of Citi Group to get the right answers..." – Paid-up subscriber James
Porter comment: Your reply contains a tragic flaw, a naïve assumption about the motivation of regulators. Most Americans believe government regulators are seeking to benefit the public. Ha, ha, ha... Nothing could be farther from the truth. Talk to any of them. Regulatory agencies exist to protect the interests of the big banks and the big businesses that are regulated. Think about this entire financial mess – all of it erupted from either government-owned and controlled entities (like Fannie & Freddie) or deeply regulated companies, like AIG, the investment banks, the regulated credit agencies, etc. How many different regulators were looking over the market for mortgages? Dozens. Did any of them do their job? Absolutely. Their job was to protect the companies who were writing fraudulent mortgages and paying huge bonuses to the executives. That's where all the money for the patronage was coming from. Who was the single largest corporate donor to Congress over the last 15 years? Fannie and Freddie. "We're from the government, we're here to help..."
"50% of my total investment portfolio is in physical silver... bullion, and eagles. Another 25% is long silver miners, another 15% is long gold and silver futures." – Paid-up subscriber Charley O.
Porter comment: You're willing to take risks I'm not comfortable taking. But... if it works out, you'll make a killing.
Regards,
Porter Stansberry
Baltimore, Maryland
February 13, 2009