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Examining Employment and Education

Looking at the technical and sentiment backdrop for companies in the education sector

by Al Schwartz 10/27/2008 10:37 AM

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So, I am listening to the media and find it interesting that the group or any of the interviewees are hesitant to use the "R" word either in the context of the U.S. economy or globally. I actually don't know if that label carries much meaning since the term is quite ill-defined, but it is rather a reflection of the public's general feeling. If you are losing your home and/or your job and your ends are no longer coming together, you are in personal recession. With corporate profits declining and pricing pressure (resistance) increasing, belt tightening will certainly come at the hands of the worker. If memory serves, we have been losing jobs since February and weekly unemployment claims have exceeded 400,000 since late July, driving that key 4-week moving average sharply higher. I am concerned that those lay-off numbers will only accelerate going forward. In light of the potential for job attrition, it would seem that many displaced workers will need to be re-educated. It is that anecdotal premise that drove me to check in on a few education and training service providers.

Apollo Group (APOL) provides various educational programs and services at high school, college, and graduate levels. Its subsidiaries include University of Phoenix, Institute for Professional Development, the College for Financial Planning Institutes Corporation, Western International University, and Insight Schools. Degrees range from associates, bachelors, masters and doctoral degree programs in business, criminal justice, general studies, health administration, and information technology. Another segment provides financial planning education programs: graduate degree programs in financial planning, financial analysis, and finance as well as certification programs in retirement, asset management, and other financial planning.

Corinthian Colleges (COCO) operates as a post-secondary education company in the United States and Canada. The company offers a range of diploma programs and associates, bachelors, and masters degrees. Its diploma curricula include medical assisting, medical insurance billing and coding, massage therapy, dental assisting, pharmacy technician, medical administrative assisting, automotive and diesel technology, HVAC, surgical technology, plumbing, electrical, nursing, aircraft frame and power plant maintenance technology, electronics, and computer technology programs.

DeVry (DV) owns and operates DeVry University, Advanced Academics, Ross University, Chamberlain College of Nursing, and Becker Professional Review. DeVry University offers associate, bachelors, and masters degree programs in technology, healthcare technology, business, and management. Graduate degree programs in management are offered through its Keller Graduate School of Management. Advanced Academics provides online secondary education to school districts in the United States. Ross University offers medical and veterinary medical education. Chamberlain College of Nursing provides various nursing degrees and degree completion programs at its campuses. Becker Professional Review prepares candidates for the Certified Public Accountant and Chartered Financial Analyst professional certification examinations, as well as offers professional education programs and seminars in accounting and finance.

ITT Educational Services (ESI) provides postsecondary degree programs in the United States. The company offers diploma, associate, bachelor, and master degree programs in various fields of study including information technology, electronics technology, drafting and design, business, criminal justice, and health sciences.

The aforementioned descriptions may be a bit more information than you seek, but it may prove useful to some and serves to lay the ground work for the following data points.

WEEKLY CHART OF APOL SINCE OCTOBER 2007 WITH 10-WEEK AND 20-WEEK MOVING AVERAGES

WEEKLY CHART OF COCO SINCE OCTOBER 2007 WITH 10-WEEK AND 20-WEEK MOVING AVERAGES

WEEKLY CHART OF DV SINCE OCTOBER 2007 WITH 10-WEEK AND 20-WEEK MOVING AVERAGES

WEEKLY CHART OF ESI SINCE OCTOBER 2007 WITH 10-WEEK AND 20-WEEK MOVING AVERAGES

It seems as if all 4 companies are following a similar trek: basing in March/April (a similar timeframe to the breakdown in employment numbers) and now suffering a recent break of a trend higher (to varying degrees as indicated by a cross or near cross of their respective 10-and 20-week moving averages). It seems as if investors had anticipated a need for the services provided and some may have profited indeed.

The data below does not look particularly encouraging at present in light of the technical picture.

Table of sentiment data for education companies

If the employment picture does extrapolate toward the bleak and we see a bit of capitulation toward a bearish mood on these issues, a play could well be in the offing. At present, these stocks will move to my watch list.

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