A ruling by the U.S. District Court for the District of Columbia recently dealt the for-profit education industry a setback.
Before getting to the ruling, I want to put a disclaimer out there that I'm no fan of for-profit education, and I think the government's recently released "gainful employment" rule is a sham.
Specifically, there were three different provisions the court ruled on.
|
Provision |
What It Calls for |
Decision |
|---|---|---|
| 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 |
Source: Reuters.
Still bearish
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
Smaller players in the field have benefitted as well, with Corinthian Colleges
Foolish takeaway
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.
- Add Strayer to your watchlist.
- Add Bridgepoint to your watchlist.
- Add DeVry to your watchlist.
- Add Education Management to your watchlist.
- Add Apollo to your watchlist.
- Add Corinthian to your watchlist.
