Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Apollo Group (NASDAQ:APOL), a for-profit college operator best known for the University of Phoenix, jumped as much as 10% following the announcement via CNBC that it received a letter from the HLC Institutional Actions Council that recommended reaffirming the accreditation of the University of Phoenix for another 10 years.
So what: Becoming an accredited institution is the first step toward receiving government funds for these for-profit institutions. With government scrutiny growing in this sector regarding how these post-secondary schools are marketing to prospective students and putting undue debt burdens on students, accreditation is no longer a given. Today's news merely reaffirms Apollo's position as a leader among its peers.
Now what: However, before you get too excited, keep in mind that those same government regulations that have allowed Apollo to perform better than many of its peers also will constrain its bottom line profits for years to come. College enrollments have weakened for multiple quarters as the cost of its education services are becoming difficult to justify. As such, even way off its all-time highs, I'd keep a safe distance from most of the sector, including Apollo.
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