Why Strayer Education, Electronic Arts, and Caesars Entertainment Are Today's 3 Best Stocks

The S&P 500 surges into the close with Strayer Education, Electronic Arts, and Caesars Entertainment leading the way with double-digit percentage gains.

May 7, 2014 at 5:15PM

Despite another day of the ongoing "tech wreck," the broad-based S&P 500 (SNPINDEX:^GSPC) was able to pull itself out of negative territory on the heels of mixed economic data and generally positive earnings data.


On the economic data front, consumer credit figures for March, and the weekly loan originations data, worked to send the market up from its lows. Consumer credit for March improved nicely, to $17.5 billion from $13 billion in February, and perfectly fits with the theme that consumers opened their wallets in force following the polar vortex In January and February.

As for loan originations, they increased 5.3% from the prior week, helping to offset the 5.9% decline witnessed last week. While it's good to see homeowners and prospective home buyers refinancing and applying for mortgages, mortgage servicing activity is still notoriously weak given how low rates are historically. This is still a troublesome trend if you ask me.

On the flipside, worker productivity for the first-quarter tumbled 1.7% as unit labor costs soared 4.2%. As we've witnessed with prior data, this was likely a result of the harsher winter, but it nonetheless serves as a point of caution for investors moving forward.

All inclusive, investors were pleased with corporate earnings and the mixed economic data, helping to push the S&P 500 higher by 10.49 points (0.56%), to close at 1,878.21.


Source: Steven Depolo, Flickr.

Surging to the upside and leading all stocks higher today was for-profit educator Strayer Education (NASDAQ:STRA), which rose 21.1% after also topping Wall Street's estimates in the first quarter. During the quarter, it delivered a drop in revenue of 15%, to $116.5 million, as its net income fell 14%, to $1.40 per share from $1.59 per share in the year-prior period. Strayer's EPS, however, topped the Street's expectations by $0.11 per share. Frankly, in spite of the bottom-line beat, I'm having a difficult time figuring out what investors are so excited about today.

Bad debt expenses rose to 4.3% from 4% year over year, while total spring-term enrollment decreased 10%, to 41,327 students. Although new student enrollment rose by 1%, continuing student enrollment, which is truly the bread and butter of driving consistency for Strayer, fell 13%. If I were a shareholder, I'd consider taking this gift and heading for the exits.

Coming in a close second was video game specialist Electronic Arts (NASDAQ:EA), which gained 21% after reporting its fourth-quarter earnings results after the closing bell last night.

Ea Fifa
FIFA 2014 Screenshot, Source: Electronic Arts. 

The company behind the Madden and EA Sports franchises reported that revenue fell 12% year over year, to $914 million, but more importantly, mobile revenue soared to a record of nearly $460 million. Excluding one-time costs, EA's profit for the quarter fell to $0.48 per share from $0.55 in the year-ago period. Compared to the Street's estimates of $0.37 in EPS on $812.4 million in revenue, EA crushed it! Looking ahead, EA is forecasting revenue of $4.1 billion for the year, in-line with expectations, and EPS of $1.85, significantly better than the $1.51 the Street had forecast. Adding icing to the cake, it also announced a $750 million share repurchase program. My suggestion would be to not get too fixated on the buyback and, instead, focus on the optimism surrounding EA's mobile growth. As long as mobile growth keeps surging, it's quite possible EA could have additional long-term upside.

Caesars Pool

Source: Caesars Entertainment.

Finally, casino and resort operator Caesars Entertainment (NASDAQ:CZR) advanced 14.1% after its joint-venture Caesars Acquisition Company (NASDAQ:CACQ) reported strong quarterly results. For CAC, total net revenue spiked to $226.3 million from $151.1 million, and adjusted EBITDA rose 32% despite the fact that its loss from operations grew to $61.8 million.

But, even more importantly, according to a report from Bloomberg, Caesars Entertainment announced that it's selling a minority interest (5% stake) in Caesars Entertainment Operating Co. to unnamed investors. The move will mean that bond holders in the company no longer hold a claim to the companies' assets, and it should allow Caesars to undertake a massive debt restructuring, which is sorely needed. While good news for current shareholders, I still view Caesars' long-term debt as too much of a hindrance to make it a viable investment.

Strayer, EA, and Caesars may have soared today, but your best chance at long-term gains may rest with this top stock
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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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