Recession, Sorry What?

These are good times at Apollo Group (APOL), ITT Educational Services (ESI) and Strayer Education (STRA). ESI recently announced stellar results beating analysts’ estimates very easily. They raised guidance and feel pretty positive about 2009. Here is a snapshot of what CFO has to say about this.

“The financial condition and fundamentals of the company are incredibly strong, and we entered the new year with a great deal of optimism for a very favorable operating environment in 2009,” said Chief Financial Officer Daniel M. Fitzpatrick. “We believe that we are well positioned to execute on our established growth plan with the goal of increasing shareholder value over the long-term.”

APOL‘s share have been on a roll. For those who are not familiar with APOL, here is the description from Google Finance-

Apollo Group, Inc. (Apollo Group)is a private education provider. The Company offers educational programs and services at the high school, undergraduate and graduate levels online and on-campus through its wholly owned subsidiaries, The University of Phoenix, Inc. (University of Phoenix), Institute for Professional Development (IPD), The College for Financial Planning Institutes Corporation (CFP), Western International University, Inc. (Western International University), and Insight Schools, Inc. (Insight Schools), and through its 80.1% owned subsidiary, Apollo Global, Inc. (Apollo Global). The Company has also established a Canadian institution, Meritus University (Meritus), which began operations in September 2008

APOL, of course make a good case for speculative option trading strategies or the ones designed for large moves. Check out the gapping occasions during last 4 earning announcement and it seems to me that most of the gains occurs during the time and for the remaining time, it doesn’t move that much.

So what to make out of it. Well the shares are surely doing good and the business is rocking. But do keep in mind, APOL is selling (P/E) to the north of 20s in an environment when broader market is expected to be a good value in single digit PE. Is it the investAor’s enthusiasm to find something that’s doing good in current environment as he/she can’t find better alternatives or is it really a growth stock to be owned. Only time is going to tell us, in the meanwhile, if you are investing into APOL, take a cautious approach and you my want to hedge any potential downside.

Best case, every thing you get everything you dreamt of when started to buy these stocks and whatever the experience analysts are saying.  But I wonder, if it is all so good, why then there has been $90 millions selling in past 4wks. The worse case scenario will be, the broader market strengthens and recession proof stock turns into laggard in the new economy as the funds starts to flow to the new leaders.

Profitable Trading, OP


Leave a Reply

Your email address will not be published. Required fields are marked *