A ruling by the U.S. District Court for the District of Columbia recently dealt the for-profit education industry a setback.
Specifically, there were three different provisions the court ruled on.
What It Calls for
|1||Schools can no longer pay recruiters certain incentives or offer commissions based on the number of students they sign up.||Upheld|
|2||Recruiters are no longer allowed to offer prospective students information that some considered too deceptive.||Upheld|
|3||Before a state's resident can accept federal funding to enroll in a post-secondary online school, that state must authorize the school's validity.||Reversed|
But we Fools are long-term investors. That means we have a three- to five-year time horizon when making investment decisions. I won't concede defeat until 2014, and last week's court ruling isn't helping these schools much.
While I'm glad that the court made the ruling it did on the first two provisions, I'm alarmed that the for-profit industry even found the need to challenge them.
That being said, I'm willing to admit that so far I've been dead wrong.
A for-profit rally
Shares of some big for-profit players such as Strayer (Nasdaq: STRA ) , DeVry (NYSE: DV ) , Education Management (Nasdaq: EDMC ) , and the University of Phoenix's Apollo (Nasdaq: APOL ) are all up between 15% and 25% since June 1.
Smaller players in the field have benefitted as well, with Corinthian Colleges (Nasdaq: COCO ) posting an 18% increase, and Bridgepoint (NYSE: BPI ) up almost 25%. What makes this all the more impressive is that the S&P 500 is actually down over the same period.
If you'd like to stay up to date on for-profit schools -- whether to buy them or short them -- I encourage you to add them to your watchlist. The next year or two should be interesting ones within the industry.