Student Debt: List of Education Stocks Being Dumped by Big Money Managers
(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA)
The issue of growing student debt has made its mark on the presidential debates, prompting President Obama to action.
Last week, Obama proposed his new “Pay As You Earn” plan to help relieve the debt burden of students. Under the plan a person’s loan payments would be capped at 10% of discretionary income and begin to take effect in 2012.
Indeed, the weight of student loans has been highlighted by studies that have shown some alarming figures.
For starters, 67% of students are graduating with student loan debt. The average amount of student debt at graduation went up 5% in 2011.
In all, some 26 million Americans are currently burdened by federal student loan debt. (via Business Insider)
What’s equally alarming is that the amount of money owed in federal student loans has surpassed $1 trillion, which is more than the total amount that Americans owe on their credit cards. This debt cannot be absolved in bankruptcy.
College tuition fees have increased more than 400% since 1982, during which time medical care costs went up 200% but median family income increased by less than 150%.
According to Business Insider, 26% of student loan borrowers who started repayment in 2005 have become delinquent on their loans, and 15% have defaulted on their loans in the same period. This can be partially attributed to graduates finding themselves unemployed or underemployed.
Without the means to pay debts off, an increasing number of Americans are defaulting on their student loans. That’s bad news for schools mostly populated by students that use federal student loans to pay the tuition fees. And it implies a significant amount of political risk inherent to the revenues of these for-profit education companies whose stocks have soared in recent years.
With student loans piling up, it should come as no surprise that education stocks might take a knock.
For that reason, we wanted to find the education stocks that appear most vulnerable to a correction.
For ideas, we collected data on institutional money flows, and identified a list of 9 educational stocks that have seen significant outflows over the last quarter.
Institutional investors think these education stocks are in trouble. Will rising student debts drag them down further?
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List sorted by market cap.
1. Bridgepoint Education, Inc. (BPI): Provides postsecondary education services. Net institutional sales in the current quarter at -739.4K shares, which represents about 4.53% of the company's float of 16.34M shares.
2. Capella Education Co. (CPLA): Provides online postsecondary education services in the United States. Net institutional sales in the current quarter at -665.5K shares, which represents about 5.09% of the company's float of 13.08M shares.
3. Ambow Education Holding Ltd. (AMBO): Provides educational and career enhancement services in high school entrance examination and college entrance examination markets in China. Net institutional sales in the current quarter at -1.8M shares, which represents about 29.9% of the company's float of 6.02M shares.
4. Universal Technical Institute Inc. (UTI): Provides postsecondary education for students seeking careers as professional automotive, diesel, collision repair, motorcycle, and marine technicians in the United States. Net institutional sales in the current quarter at -826.3K shares, which represents about 4.2% of the company's float of 19.68M shares.
5. Corinthian Colleges Inc. (COCO): Operates as a post-secondary career education company in the United States and Canada. Net institutional sales in the current quarter at -3.3M shares, which represents about 4.27% of the company's float of 77.36M shares.
6. ATA, Inc. (ATAI): Provides computer-based testing services in the People's Republic of China. Net institutional sales in the current quarter at -412.1K shares, which represents about 5.07% of the company's float of 8.13M shares.
7. ChinaCast Education Corporation (CAST): Provides post-secondary education and e-learning services in China. Net institutional sales in the current quarter at -7.2M shares, which represents about 24.84% of the company's float of 28.99M shares.
8. Cambium Learning Group, Inc. (ABCD): Provides research-based education solutions for students in the United States. Net institutional sales in the current quarter at -1.3M shares, which represents about 22.93% of the company's float of 5.67M shares.
9. China Distance Education Holdings Limited (DL): Provides online education and test preparation courses, and other related services and products. Net institutional sales in the current quarter at -854.1K shares, which represents about 14.48% of the company's float of 5.90M shares.