Friday, January 9, 2009
(Cont'd from above)...

Jim (cont'd):   

About 2/3 of the companies students are in the military… which is the only part of our government that is well run, and well funded and loves to pay for tuition… we like American Public Education for that one simple reason… when the job market dries ups…people, they go back to school… it’s a fabulous place to hide. And since people aren’t actually rolling in dough right now… they are probably more likely to want to go back to school… a low budget school… like those run by APEI… this has been proven. Back in 2003, two economists that I have never heard of, Delles and Seticalurlas, studied data from between 1968 and 1988, and they found that a 1% increase in U.S. unemployment… 1%… results in a 2% increase in enrollments in post secondary educational institutions…. double…

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Anyway, that is the theory… So far it actually seems to be born up by the facts… did you see the Apollo Group Inc. (APOL) today… after the close of the show yesterday… the largest for profit college in graduate education company blew away the numbers when it reported its quarterly results… in a market that was pretty down… Apollo stock was up 4.9% today thanks to the great quarter… Now, on the conference call… the company told us that this was the third consecutive quarter of an acceleration… everyone else is seeing down numbers, right?… and acceleration in new student enrollment growth… imagine if a retailer saw acceleration, we would take that to the moon… more people are going to Apollo schools at a faster and faster rate… and what is good for Apollo Group is also good for American public education… I know that I would have gone to an online school if they existed 40 years ago when I was in my 20’s… but given that I mostly went to school to meet women… I wonder whether, that … if somehow this, they, get somehow lost in this kind of online venture… and I am not the kind of 63 year old who preys on members of the opposite sex in chat rooms or on J-Date like House’s Dr. Cutty for that matter.

This is one of the few high growth, high multiple stocks left out there… the street expects 41% revenue growth and 44% earnings growth from APEI in 2009... 41%… remember when Google (GOOG) used to trade that way… or Apple (AAPL)… so the fact that it is trading at 32 times earnings, don’t let it scare you… the fact is, online education is one of the few genuine growth areas left in the stock market… very few double digits, let alone 40... especially now that the job market has gone down the tubes… in 2008, Edu-Ventures forecasted more than 2.1 million students enrolled in fully online post secondary education programs… about 11.9% of all students enrolled in degree granting post secondary institutions for that year.

Now, back in 2000, 2001 school year only 1.3% were enrolled in fully online programs… see this number has exploded… and while post secondary enrollment is expected to increase in the U.S. at 1.3% annual rate over the next decade… online enrollment is expected to grow 12% annually… this is just such a hot area… that is going to be 3.8 millions students in 2013... that would represent almost 20% of total post secondary enrollment that year… in other words, if you go to 2020 our kids are going to be probably going online to school… they are not going to colleges or graduate schools… plus these for profit online education names have been just about the only stocks that have been able to become public in this environment… when someone can come public in this month… that is a testament of strength… so American Public Education is a long term secular growth story that is working right now even in this recession… the company I am, also has a great little niche… military education… right now there are 2.2 million men and women in the U.S. Armed Forces, and analysts estimate that only 30% of enlisted soldiers hold bachelor degrees… now it is hard for people in the military to become students since they have to have these irregular schedules and extended deployments… which makes online education frankly… ideal, right… for these people… but of the 1200 schools that serve military students, only 20 to 30 are online… not only is APEI is American Military University online… but it also manages to gram 24 semesters into a given year… with 8 week to 16 week long classes… that is perfect for military students who need the extra flexibility… and by the way, we as citizens should be paying for our soldiers to go… anybody who wants to… and thanks to the newer and bigger G.I. bill that kicks in this July… we are going to be… I say that it is good for the troops… and good for this companies earnings… APEI makes more money as people take more courses… and net course registration have increased at an improvise 57% compound annual growth rate over the last 3 years… I am giving you all these figures because this stock is sky high… so I want you to know when it drops like 5%, 10%, why you should buy more.

Also, 2007 55% of new enrollees from APEI were from student referrals…. hey, doesn’t that tell you that people are gravitating toward this one… APEI came public 2 years ago at 20... did a secondary, offered more shares at $37.50 in December… stocks had a big run today… but it is really just around that… of course that was courtesy of Apollo’s great quarter… should we wait… how about this… below $37 we buy… we want to catch more moves like in the stock today.

Here is some others, ITT Educational Services Inc. (ESI) reports on January 22nd… DeVry, Inc. (DV) on the 27th… Strayer Education Inc. (STRA) that was up really big on the 12th of February… Corinthian Colleges (COCO) report in early February… if they do well, then what I think what you will get… is fabulous pin action… for APEI doesn’t report until March… since APEI typically gives conservative guidance it is likely that even if the quarter is good… the street might not like the guidance… and then the stock would come down… and then you know what you want to do then… buy, buy, buy… because this is what is known as a secular growth story… it will be a nice buying opportunity… management has consistently done UPOD…. under promised and over delivered… hey, speaking of management… the CFO guy who runs this string from Strayer… much larger per profit post secondary education… why would he go to this place… he could stay at Strayer… that is a good sign for American Public Education… unless he believed the opportunity here was for real… there was no reason that he shouldn’t move.

Okay, here is the bottom line…

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The Bottom Line!:     I really tried to convince you about the theory… right, of online education… now I want you to think that American Public is the best… because of the military… it is the rare company that can genuinely benefit from unemployment… and its still speculative though… it has had a big run today… better not chase it… and let American Public Education, Inc. (APEI) come back in before you pull the trigger.

APEI Could Benefit From Job Losses, But Be Careful Because It Is A Speculation Play...

[verbatim recap]

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