Don't Look a Gift Horse in the Mouth

If the market gives me a 25% gift, I'm not going to turn it down again.

Apr 11, 2014 at 9:35AM

Bridgepoint Edcuation (NYSE:BPI) is one of the three losing positions -- of the 19 currently held -- in my Messed-Up Expectations portfolio, the real money portfolio I run on behalf of The Motley Fool. I purchased it twice in mid-2011 at around $22 per share, and then suffered through the massive drop in price to below $10 about a year later. By late 2013, it had clawed back up to near my purchase price, but its recent earnings release for 2013's fourth quarter has put paid to that. At least in the short term.

The company was hurt in 2012, thanks to accreditation issues, especially at Ashford University, one of Bridgepoint's two brands. Those were resolved in 2013 and the agency, Western Association of Schools and Colleges, granted accreditation to the university last summer.

Unlike the price drop in 2012, the recent share price drop was for a more prosaic reason: The company missed earnings estimates. Well, that and the fact that total student enrollment had declined by 22% year over year. Plus, you could probably add management's less-than-stunning guidance for 2014, and here we are with shares down about 25% from their February high.

It's actually not as bad as the surface numbers make it appear. It reported a loss of $0.12 per share when analysts were expecting a break-even level. Most of that loss, $0.10 of it, was due to a one-time legal accrual charge, so that much should be ignored (as long as it doesn't become a regular thing); but the company still ended with a loss. On the other hand, new student enrollment was up for the quarter, by 10%.

The company's not about to go bankrupt anytime soon, however, despite the disappointing Q4 results. For one thing, over half of its market cap is sitting in cash and investments, and it has no debt. For another, it's continuing to improve its marketing, targeting potential students who are more likely to graduate and find jobs, something the administration is concerned about. Rebranding Ashford University's business school as the Forbes School of Business  at Ashford University doesn't hurt these efforts, either.

I'm satisfied that the company is on the right track and will turn the situation around, possibly sooner than a pessimistic market is willing to believe. Thus, I'm going to take advantage of the 25% drop to lower my cost basis on what I believe is a winning company, and add shares as soon as Fool trading rules allow.

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Jim Mueller has no position in any stocks mentioned. The Motley Fool owns shares of Bridgepoint Education. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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