Transcript:
Chris Hill: When we're looking at consumer-good companies in 2012, what are the companies that had a 2012 that they are glad is ending? They'd just as soon forget the year they just had?
Austin Smith: It's definitely interesting. When I ran a screen of those stocks that had performed both best and worst, you see genre clusters at the top and bottom. At the top was all housing stocks, and at the bottom it's basically for-profit education stocks, and broken retailers.
What I mean is that, by taking a look at this list at the time that it was run a few days ago, we have Apollo Group down 62%, [Deckers Outdoor] is down 48, Best Buy down 48, J.C. Penney 47 down, DeVry down 31%.
Some of the common themes I think that are pushing that down ... we see the entire for-profit sector being weak. It's come under a lot of scrutiny recently. [Bridgepoint Education] recently lost their accreditation, we see the government definitely getting more strict with how these funds are going to be issued, and a lot of these companies are bumping up against their three-year cohort default rate limits, so it's kind of a scary time to be in this space, certainly.
When you've got tightened government spending, it's a scary place to be in. As far as down-and-out retailers, it's a story we've talked about for a long time.
Chris: Sure, yeah.
Austin: Companies like Best Buy ... just broken models. You're a showroom for [Amazon.com]. Companies like J.C. Penney, a very dowdy image, and that's difficult to turn around. Ron Johnson has been plowing money into it, but it's really hard to correct a dowdy image when the entire bricks-and-mortar retail sector is weak as is, and even those companies that are strong are having difficulty.
The two sectors, I think, that have 2012s that they wish they could forget are going to be for-profit education, and some weak bricks-and-mortar retailers.
Editor's note: Ashford University (owned by Bridgepoint Education) is currently accredited by the Higher Learning Commission (HLC) of the North Central Association of Colleges and Schools. Earlier this year, Ashford applied for initial accreditation by the Western Association of Schools and Colleges (WASC). While that application was initially rejected, WASC has permitted Ashford to reapply, noting that Ashford has already initiated many of the processes required to achieve WASC accreditation.
