Whoa! These 2 Stocks Beat the Dow

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

All eyes might be on Greece and Europe going their separate ways, but probably the more important economic news is the slowdown underway in China. For the seventh straight month, the PMI has shown the economy in contraction while factory export orders tumbled in May.

Yet some stocks went the other way, strapping on rocket packs and turning in double-digit percent increases. Resist the urge to high-five everyone in the cubicles next to you, though. Smart investors won't celebrate until they know why their stock surged, because without a fundamental basis for the bounce, these stocks can quickly make the return trip down.

Getting left back
Having lost about half its value in the last three months alone, the 10% gain isn't much for troubled post-secondary education specialist Corinthian Colleges (Nasdaq: COCO  ) , but investors will take what they can get.

The move was part of a somewhat broader rally in education stocks with Career Education (Nasdaq: CECO  ) jumping 11% and Strayer Education rising nearly 4%. Ever since the Obama administration launched its broadside against the for-profit sector, the schools have seen their grades slip and are in danger of being left back for the year.

Earlier this month, Cornithian posted earnings results that saw profits miss analyst expectations and had management offering up bleak enrollment guidance: It forecast virtually no growth for its fiscal 2013 school year. Financial aid for students without a high school diploma -- a segment that comprises more than 5% of its student population -- was recently cut off, and without an influx of new students, revenues will be hard to come by.

Financial aid is the next looming bubble the economy will have to face. As student loan debt approaches $1 trillion, the likelihood of a taxpayer bailout mounts, particularly as unemployment remains untenable in the 18- to 24-year-old demographic: 46% are unemployed. Student loan debt is higher than even credit card debt. Even banks don't see the value in lending anymore, with JPMorgan announcing last month it would limit lending to only its current customers, while US Bancorp is pulling out altogether. The bubble is ready to burst.

For that reason, it's hard to see Friday's rise as anything more than a dead-cat bounce for the dog that's been Corinthian Colleges. As much as I might rail against the administration's assault on for-profit educators, it's hard to recommend Corinthian as an investment, and I've rated it to underperform the markets on the Fool's stock-rating service CAPS.

I'm in the minority there, where 83% of the members rating Corinthian see it outperforming, but the low, two-star rating they've assigned it suggests they think there are better places for your money.

You can add the for-profit educator to your Watchlist, as well as tell me in the comments section below or on the Corinthian Colleges CAPS page if you think betting against the company makes me a dunce.

Tilting at windmills
Is there an acquisition in the works? Junior gold miner Extorre Gold (AMEX: XG  ) hinted that it might be an attractive takeover candidate when it announced its board had adopted a shareholder rights plan to give it enough time to consider any bids that might be made. While such plans are typically made to ensure management makes out well in any acquisition -- so they should rightly be seen as "insiders rights" plan -- investors were undoubtedly hopeful that someone just might make a bid.

Extorre recently announced it hit high-grade gold ore deposits at its Argentinean Cerro Moro mine. It's considering using an open-pit mining method to get at the gold rather than the concurrent underground and open pit methods it had previously considered. It's keeping in mind the costs any new program would accrue to investors, and it is studying the least dilutive means for financing the project.

The wildcard in all this, and perhaps why management is moving on all these different fronts simultaneously and so quickly, is the Argentinean government has gone off the rails and begun nationalizing "important" industries. Last month, it took over Spanish oil giant YPF and forced Telecom Argentino to suspend its dividend. Extorre says there's a world of difference between the industries, so it doesn't see any danger to its assets, but a government grasping at power doesn't always respect such finer points, particularly if it can bring money into the government's coffers.

Moreover, the government recently told Barrick Gold (NYSE: ABX  ) , Xstrata, and Vale (NYSE: VALE  ) they had two weeks to come up with plans to replace imports with domestically manufactured goods. If that doesn't sound like a prelude to a pretext to seize their assets -- Cristina Kirchner used equally specious arguments to seize YPF -- then I don't know what does.

Argentina's once-healthy economy was built by investments made from foreign companies, but because of exponential growth in government spending to shore up elections, and rapacious policies that have wrecked its health, the government has now set a course to steal the assets of these foreign entities -- making an investment in the country too risky to contemplate.

While CAPS member DarthMaul09 is looking for Extorre to hit paydirt by 2014, I find it difficult to see it making it that far. Thus I'll also be rating Extorre to underperform on CAPS. It's hard to imagine an outside company wanting to move into a volatile, high-risk situation like that, and the potential for the government to simply seize control of its assets -- particularly in light of its rich finds -- puts the miner in a tough position.

Add your opinion to the Extorre Gold CAPS page if you think it can sidestep a government seizure, then add it to your watchlist to see what moves Kirchner ultimately makes.

Going into orbit
There is one gold miner the Motley Fool believes will strike it rich, and you can find out right now which one it is by getting the special report, "The Tiny Gold Stock Digging Up Massive Profits." It details the miner that will capitalize on the coming inflation boom and how you can protect yourself by owning gold. Get your free copy today!

Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of JPMorgan Chase. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1897499, ~/Articles/ArticleHandler.aspx, 10/27/2016 5:31:05 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
COCOQ.DL $0.00 Down +0.00 +0.00%
Corinthian College… CAPS Rating: *
XG.DL2 $0.00 Down +0.00 +0.00%
Extorre Gold Mines… CAPS Rating: **
ABX $16.65 Down -0.24 -1.42%
Barrick Gold CAPS Rating: ***
CECO $7.25 Up +0.10 +1.40%
Career Education CAPS Rating: *
VALE $6.91 Up +0.12 +1.77%
Companhia Vale CAPS Rating: ****