Bernanke's taper has thrown the cat among the pigeons.
Italy showing signs of creaking. Need to watch that one. Doesn't seem to be on the MSM radar.
Runctions in Chinese interbank market. Need to watch that one also. Canary in a coalmine.
Indian rupee getting jack-hammered. Brazilian real getting similar treatment.
Japan acting very unhinged or is that deranged.
High yield, emerging market, and investment grade bonds waxed. Carry traded not being carried.
Social unrest in Turkey and Brazil. Where did that come from.
Wednesday, June 26, 2013
Wednesday, June 12, 2013
Burned Out For Profit Education Sector Set To Run
Been looking at a few names in the burnt out for profit education space.
I think it will recover - maybe not to its former glory (read that profit margins and growth rates) - but it will survive and live to fight another day. Which means at current valuations most of the stocks in the space are really cheap.
The sector recently staged an impressive rally off the bottom. The interesting thing is that enrollment data has continued to decline. When a market rallies this strong from such a low valuation on no tangible information, it indicates to me that the bottom trollers have put their hooks in and are getting in ahead of the crowd. I expect the sector to see a turnaround in enrollment fortunes in 2014 which should propel it higher (depending upon how much it has already rallied in the interim).
Make no doubt about it, this sector is scary risky. From massive regulatory overhang to no sign of recovery, it is not for the faint of heart. Despite offering up tremendous value from a contrarian perspective, it may not be appropriate for a long term investor looking for good quality companies. Fundamentals are still declining and things look bleak on the surface. It is only under the surface when you look at the potential and the value being attached to assets that have enormous operating leverage, that you see something positive.
As a long term investor you always need to remind yourself that you really want to own good quality companies, in good industries, with good tailwinds. The for profit education sector does not offer those characteristics. But for contrarian value investors, it offers up an attractive profile.
On a final note. I have a lot of disdain for the sales and marketing practices of these firms. I don't like the way they do business. I don't like how they operate. They do however have a great business model (at least it use to be great). It is an ethical dilemma to invest in an industry/sector where they operate in a manner that you don't like but where there is tremendous value in the businesses who operate in the space.
I think it will recover - maybe not to its former glory (read that profit margins and growth rates) - but it will survive and live to fight another day. Which means at current valuations most of the stocks in the space are really cheap.
The sector recently staged an impressive rally off the bottom. The interesting thing is that enrollment data has continued to decline. When a market rallies this strong from such a low valuation on no tangible information, it indicates to me that the bottom trollers have put their hooks in and are getting in ahead of the crowd. I expect the sector to see a turnaround in enrollment fortunes in 2014 which should propel it higher (depending upon how much it has already rallied in the interim).
Make no doubt about it, this sector is scary risky. From massive regulatory overhang to no sign of recovery, it is not for the faint of heart. Despite offering up tremendous value from a contrarian perspective, it may not be appropriate for a long term investor looking for good quality companies. Fundamentals are still declining and things look bleak on the surface. It is only under the surface when you look at the potential and the value being attached to assets that have enormous operating leverage, that you see something positive.
As a long term investor you always need to remind yourself that you really want to own good quality companies, in good industries, with good tailwinds. The for profit education sector does not offer those characteristics. But for contrarian value investors, it offers up an attractive profile.
On a final note. I have a lot of disdain for the sales and marketing practices of these firms. I don't like the way they do business. I don't like how they operate. They do however have a great business model (at least it use to be great). It is an ethical dilemma to invest in an industry/sector where they operate in a manner that you don't like but where there is tremendous value in the businesses who operate in the space.
Cat Among The Pigeons
Rising interest rates have thrown the cat among the pigeons.
Global markets are in flux as they weigh the likelihood and the implications of an end to the interest rate cycle.
I think this is classic market "crisis" following the pattern from the last few summers. Equity markets had been on a tear and needed a timeout and it was only a matter of time before the market latched onto something to justify it.
Abe gave them reason to worry and Bernanke caught them by surprise.
I don't think CBs have abandoned the QE formula and will provide confirmation of that if the markets continue a more sizeable pullback, ie. 12%.
Now at some point in the future rising rates are going to be a real issue, but I think current palpatations are a little premature. With the 10 yr pulling back from 2.3% we might have seen the high in interest rates for at least the next 6-12 months.
Global markets are in flux as they weigh the likelihood and the implications of an end to the interest rate cycle.
I think this is classic market "crisis" following the pattern from the last few summers. Equity markets had been on a tear and needed a timeout and it was only a matter of time before the market latched onto something to justify it.
Abe gave them reason to worry and Bernanke caught them by surprise.
I don't think CBs have abandoned the QE formula and will provide confirmation of that if the markets continue a more sizeable pullback, ie. 12%.
Now at some point in the future rising rates are going to be a real issue, but I think current palpatations are a little premature. With the 10 yr pulling back from 2.3% we might have seen the high in interest rates for at least the next 6-12 months.
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