Obama’s Effect on For-Profit Education Stocks
Watching ESI, APOL, and DV
Dear Bottarelli Research Member,
While the markets continue to bounce back from each and every dip, an important political maneuver just occurred which could have some big-time effects on the for-profit education stocks like ITT Educational Services (ESI – NYSE), Apollo Group (APOL – NASDAQ), and DeVry (DV – NYSE). Since this sector group is great for intra-day trading, it’s best to keep on top of this news. After all, it could lead to a very profitable opportunity going forward.
Here’s the low-down…
Speaking from a community college in suburban Virginia, President Obama signed the final piece of health reform, which included restructuring the way the government handles loans affecting millions of students.
The way I read this, the losers are the banks who are profiting off student loans. You see, the new law strips banks of their role as middlemen in federal student loans and now puts the government in charge.
According to the president, this change would save $60 billion over the next 10 years. That puts a big dent into the $70 billion student loan business for the banking industry. But when it comes to for-profit education stocks, it looks to solidify their revenue stream. After all, half of the undergraduates in the country receive federal student aid, and about 8.5 million students are going to college with the help of Pell Grants. At one time, there was fear that the poor jobs market would limit student’s ability to get loans and re-pay loans, which caused some major fear in APOL, ESI, and DV.
But now that this law has been signed, it appears like the storm clouds have passed. Therefore, we just might have a strong call-play opportunity in this sector group. As you can see below, ESI has been moving down lately which could drop it down to a nice support level around $110.
At the same time, APOL reported strong earnings this week, but as you can see below, the stock has sold off on the news. If any strong trading opportunity comes up, you’ll be the first to know. Until then, let’s sit tight while closely monitoring this sector.
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Lock and load!
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