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ITT Educational Services Inc. Message Board

  • thedeathrace thedeathrace Mar 8, 2013 10:42 AM Flag

    Increased hiring is super bullish for the education stocks

    Most investors have no clue regarding how the education space works in relation to the economy. The education companies are much like the temporary employment companies. When the economy and hiring are improving or are solid, these companies do great. Why? Because employers go to the education companies to get newly trained workers. The education companies see increased interest in their products/services from students as the students see job opportunities they know that they can not take advantage of unless they are trained and educated.

    Education companies also do well right as unemployment spikes as their are laid off workers who want to get new jobs and take their unemployment time to get retrained.

    Difficulties arise after unemployment spiking if the unemployment rate stays high, like we have had now for 4 years. That is the worst time for education companies as students figure why bother paying for an education when I cant get a job after graduation. This is the worst of all environments and is what the education companies have been suffering through. I do not think it has ever been worse for them. Along with the job market difficulties, student loan defaults naturally increase as the unemployed have no income with which to pay down their loans. The increase in default rate has become a big war cry for the short sellers and politicians. But it is not really the fault of the education companies. As President Reagan said, It is the economy, stupid.

    So, if hiring starts to improve, the education companies are going to see a flood of new students. While most stocks are up because investors have anticipated a recovery and fully priced in positives, such is not the case for the education companies. Investors have priced in something beyond a depression in the education sector. This is a short term phenomenon based on the above dynamics. 5 years from know the environment will be completely different and the current difficulties long forgotten.

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