Wednesday, April 30, 2008
Sunday, April 27, 2008
- Revenue is up 18.4% to $291 million
- Operating Income up 70.9% to $50.6 million (17.3% operating income margin)
- Net Income up 67.2% to $38.3 million
- New undergraduate enrollment increased 12.1% to 12,410 students
- Total student enrollment increased 10.3% to 44,814 students
- Total number of online courses taken increased by 25% to 43,889
- For the January 2008 term Ross University (medical/veterinary) is showing a 7% enrollment increase from a year ago.
- The company opened up Chamberlain College of Nursing opened up their two new locations in Illinois and Arizona. They are still planning to open up one Chamberlain facility per year going forward.
- Becker CPA review’s revenues surged 30.4% compared to the same quarter a year ago. A new office in Hong Kong was opened to meet the needs of Asia.
Daniel Hamburger (CEO), on the 3rd quarter conference call reiterated that the company's relationships with lenders still remains strong, and that FFEL and Private Lending would still be available to DeVry students. He did mention that there were some disruptions with Wachovia, but that the issues would be resolved within a few weeks. The other lenders that DeVry is working with are:
- Sallie Mae (DeVry is only 1 of 2 instutions Sallie Mae is continuing private lending programs with)
- Bank of America
- Wells Fargo
The company also spoke about a possible acquisition in the career college market, specifically around the healthcare segment. The company has strong cash flow, but the CFO did mention that they had a $250 million line of credit they could tap if they were to make an acquisition. Given this news, and the important summer months where students seek more student loans heading into the fall semester, I'm still waiting for an entry position under $50/share.
Keep an eye out for the next few months to see how the new government program to buy up student debt will play out.
Thursday, April 24, 2008
- FFEL (Federal Family Education Program) / Title IV loans. These loans are backed by the government, but issued through financial institutions.
- Direct private lending from the financial institutions.
2. US Department of Labor, Bureau of Labor Statistics (Accounting/Auditors and Financial Analysts/Advisors).
3. Bank of America to Direct Student Loans to Federal Program, Wall Street Journal, Apr.18th.2008.
4. DeVry earnings call transcript 2Q08, SeekingAlpha.com. Jan.24th.2008
5. DeVry provides update on Student Lender Relationships, April.21st.2008.
6. White House Backs Student-Loan Plan, Wall Street Journal. April.24th.2008.
Wednesday, April 23, 2008
Tuesday, April 8, 2008
Friday, April 4, 2008
The first quarter has come and gone putting the Ten Grand Chicago portfolio through its paces. The equities market went on a roller coaster ride with the Bear Stearns fiasco, credit markets tightening up, and the Fed stepping in to inject some liquidity into the markets. The portfolio suffered a drop of 0.54% year to date which is not too bad when compared to the S&P 500 index which fell 8.6%. In real dollar terms the portfolio is running at a value of $9,946.19. A few things about portfolio performance:
- Beating the S&P 500 index is nothing to brag about. Especially only after one quarter. The fact is I am currently losing. Some money managers like to advertise that they can beat the index, and that is something to brag about if you can do it consistently year after year. However, my take on beating indexes, is that if your portfolio is down, the fact of the matter is you are down.
- Secondly, it’s easy to sit on the sidelines with a majority cash position and say you are beating the S&P500 index. We’ll see how things go after 2008 is over when all of my money is in play.
Now that I’ve got that out of the way let’s jump straight into what happened with respect to the stocks covered this past quarter.
Southern Copper Corporation (PCU, 16.69%) The market has pushed commodities to record levels, but as of late everything from gold, wheat, and oil has come off their highs. Copper on the other hand is currently come off $3.60’s and pushing $3.90’s at the moment. Since entering the position, the stock has been the strongest performer of the bunch with a 16.69% rise. This is purely a supply and demand situation, and in order to meet demand the company just stated that they would be increasing their investment ($1.3B) in their Peruvian copper project . As long as China, India, and other emerging markets continue to buy copper, copper prices should remain relatively high for the coming year. It will be interesting to see what China’s first quarter GDP numbers are at on April.14th. This should give some indication to the degree of infection the US economic malaise is having world wide.
Intevac, Inc. (IVAC, 13.90%) The company has done well to tack on orders for its 200 Lean magnetic disk sputtering systems of late , which has helped push the stock’s price up from its lows in mid January. More analysis about this company’s image and magnetic disk manufacturing business will be out shortly.
ING 6 month CD @ 3.65% This was one of my more conservative moves to park cash until the 3rd/4th quarter of this year when I will be looking for more stocks to invest in. Looking back it was a good move as interest rates have dropped further. ING is currently offering 6-month CD’s at 2.75%
XLF Financials ETF (XLF, -4.12%) I thought it was a good time to get into the US financials this past quarter due to all the bad financial news taking down XLF. All the action of late by the Fed, and Henry Paulson’s announcements about a new “regulatory” plan and some of Wall Street’s push back is pretty much the free capital market system at work. Although any corrections will take time, the system allows for this back and forth, and iterative corrections to happen. XLF should prove a good move over the long term.
Trimeris, Inc (TRMS, -6.99%) The company continues to try and maximize its cash flow through the sales of Fuzeon. 1st quarter results will show where this is heading. I wasn’t happy with their recent announcements that they are still working with their partner Roche in determining how to value COGS. There could be another adjustment coming down the pipe to this line item on next quarter’s income statement. Any adjustment may be in Trimeris’ favor, but the lack of visibility is of concern. The stock is currently trading above my top end of my valuation of $6.69/share.
NutriSytem, Inc. (NTRI, -36.28%)* This was the most damaging performance to the portfolio to date yielding a drop of 36.28%. That hurts and I definitely did not think the worst case scenario would play out this hard. In my original analysis, I had assumed that in the worst case, the company would drop top line revenues by 5% this year. This results in a lower end valuation of around $19/share. Unfortunately the company guided down full 2008 revenues to a range of [$690million - $710million] . If we assume the worst case scenario of $690 million, and customers ditching their $300/month meal plans, that registers a drop of just over 11% in top line revenues for 2008. Plugging this back into my original cash flow analysis and adjusting 2009 top line revenues dropping 6%, this yields a valuation of $20.37/share. The stock currently looks undervalued, but I’ll be waiting for 1st quarter results to see if there is an opportunity to add to my position.
DST Systems, Inc. (DST, 0.27%) I got out of DST after doing a deeper dive into their business. My conservative estimates when valuing this comapny's business ($15.47/share) was way off my entry point of $73.60/share. My analysis showed a long term pattern of shrinking free cash flow based on increaing top line revenues. That was enough for me to exit. A reader had questioned my valuation and eluded to it being way too conservative. After doubling back on the company's balance sheet I remain firm on my decision. The comapny has a number long term investments, some of them parked into real estate. That may come in handy for valuing the company's book value, but my whole approach surrounds valuing a given comapny's operations and cash flow.
Q2 Plays I’m slowly building out my playbook for the 2nd quarter and will have more coverage in the coming weeks. Up next will be DeVry (DV), and Strayer (STRA).
The valuation for NTRI based on a worst case scenario is $18.83/share. This assumes a 11% drop in top line revenues in 2008, followed by a 6% drop in 2009. The original posting had the valuation listed at $20.37/share