tag:blogger.com,1999:blog-7294165939647321702.post8095282766395014470..comments2024-03-11T10:31:06.107-04:00Comments on <center><a href="http://www.barelkarsan.com">Barel Karsan - Value Investing</a></center>: Getting Schooled By Career Education CorpSaj Karsanhttp://www.blogger.com/profile/04493152766022812984noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-7294165939647321702.post-75717123616838444292013-03-13T17:12:31.007-04:002013-03-13T17:12:31.007-04:00To 3/10/13 at 11:21 PM:
Sure, student lending is ...To 3/10/13 at 11:21 PM:<br /><br />Sure, student lending is very much like the subprime housing situation.<br /><br />They are giving out loans to EVERYBODY with almost no underwriting criteria.<br /><br />The government will loan you money to literally study ANYTHING! It does not matter if you can get a job.<br /><br />So there is no value to the collateral (possibly excepting the co-signers). There is also no underwriting standard.<br /><br />Perfect ingredients for inflating a bubble...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-39987616921822661712013-03-10T23:21:15.347-04:002013-03-10T23:21:15.347-04:00To the first comment, the subprime situation canno...To the first comment, the subprime situation cannot be compared to the student loan situation. 80% of the credit risk is carried by the federal government, and about 90% of the balance has co-signers taking on the risk. I'm not arguing that things aren't going to fall apart in the industry, but it is not a subprime situation.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-18113777797726473202013-03-08T16:51:32.136-05:002013-03-08T16:51:32.136-05:00Excellent point on COCO Saj,
One thing is for sur...Excellent point on COCO Saj,<br /><br />One thing is for sure with COCO: Expect volatility.<br /><br />The ED will either continue supporting COCO's title IV elgibility due to the restated 2011financials, and current compliance<br /><br />or<br /><br />The ED will make an example of them mafia style, sending the shares in the toilet as they violate debt convenants, and are forced to scramble for cash however they can.<br /><br />Given the run rate FCF they will generate if the title IV funding continues, I believe the risk/reward is favorable...but high.<br /><br />I like the odds due to the forecasted Pell Grant surplus, and superior economics of a loan model (even with high defaults) vs the outright subsidy model of public ed. Particularly due to the states' cash strapped budgets, and clear shortage of skilled people that COCO and similar schools train. The only option left seems for profit. While a complete loss of capital is obviously possible, I think it is a favorable bet.<br /><br />Certainly not for someone who doesn't like the possibility of losing the whole sum comitted.I'm long the equity, but the binary style outcome may also offer an opportunity in the calls (As outlined by Greenblatt). The downside is potenitally similar ie. 0, but the upside could be greater. Just a thought.<br /><br /><br />Thanks for the response, and keep up the good work!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-85416949167870417022013-03-08T02:12:25.234-05:002013-03-08T02:12:25.234-05:00Hi Garrett,
I actually defined net cash in the ar...Hi Garrett,<br /><br />I actually defined net cash in the article itself! <br /><br />"...net cash position (all cash less all debt)..."<br /><br />This definition makes sense in the same way as net debt isn't just debt less all assets.<br /><br />Hi Anon3,<br /><br />COCO does look interesting, I agree. But I do fear they may have to do a substantial capital raise to meet regulatory requirements, so I would worry about getting quite heavily diluted.<br /><br />Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-41115082316473300112013-03-08T02:02:20.711-05:002013-03-08T02:02:20.711-05:00Total cash = $402M
Total liabilities = $511M
Net c...Total cash = $402M<br />Total liabilities = $511M<br />Net cash = $(109)<br /><br />This isn't a net cash stock. I'm at a loss for how you came up with $320M.g-mohttps://www.blogger.com/profile/12548436467846748892noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-42273596946063074282013-03-06T18:09:56.145-05:002013-03-06T18:09:56.145-05:00I prefer COCO in the space. Good commentary and an...I prefer COCO in the space. Good commentary and analysis here:<br />http://m.gurufocus.com/news_read.php?id=198980Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-91239262232581279132013-03-06T13:55:10.829-05:002013-03-06T13:55:10.829-05:00Yes, CECO trades at a discount to cash but it also...Yes, CECO trades at a discount to cash but it also has liabilities. So simply saying it has $X per share in cash doesn't account for these liabilities.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-2022235533548798562013-03-06T10:13:28.187-05:002013-03-06T10:13:28.187-05:00I think it is surprising how HIGH the stock is tra...I think it is surprising how HIGH the stock is trading for...<br /><br />Don't let the numbers fool you.<br /><br />This company has tremendous customer concentration. In fact, I would guess that ONE customer accounts for well over 90% of revenue!<br /><br />Who is that customer? Why the federal government of course. When you look at the revenue the school receives, 90% is from student loans. Student loans originated or guaranteed by the government.<br /><br />There are SERIOUS problems with the student loan situation. If CECO has too many delinquent loans, they don't qualify to get any more...<br /><br />HOWEVER, current regulations are a joke...Do you want to bet your investment that regulations are NOT going to be tightened?<br /><br />Additionally, there is an unbelievable amount of problems from the lawsuits. These are not frivolous suits either...<br /><br />Another problem is how incredibly damaging to students this industry is. An argument can me made that the "for profit" education industry is largely a wealth transfer from taxpayers to the corporations with students getting crushed in the middle.<br /><br />Before anybody invests in "for profit" education I would suggest going to the Google and searching "subprime comes to education". The results will show article after article about the antics of this industry. There are articles by the New York Times, Forbes, LA Times, The Telegraph, Washington Post, and many other credible publications.<br /><br />I doubt this industry will survive in it's present form...Anonymousnoreply@blogger.com