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Peter Hix
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I am a student at Brown University and the portfolio manager of the Brown Investment Group. I have always had an appreciation of the stock market and have followed its development since high school. I have recently gotten in the game for real, whereas before I simply invested virtually (with... More
My company:
Brown Investment Group
My blog:
The Fundamental Hedgie
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  • Not So Fast, The Positive Payroll Numbers Could Trigger Another Selloff
    The July nonfarm payroll numbers came in at 117,00 jobs added in total and the private sector added 154,000 jobs, beating the estimates of 75,000 jobs.  These numbers were a much-needed positive indicator after last month’s dismal numbers, which were actually revised up to 46,000 from 18,000.  But now why would such a marked improvement and positive surprise trigger another sell off. Well the market sentiment is so poor that any upward movement in the markets is sure to be met with some selling as investors try to make back some of the losses from yesterday before moving into cash.  The uncertainty in Europe is still weighing on consumers’ minds not to mention the pathetic excuse for a piece of legislation passed on the debt crisis. 

    Read the rest at my blog The Fundamental Hedgie.
    Tags: RL, Economy, China, Europe, Employment, Jobs, Earnings
    Aug 05 10:55 AM | Link | Comment!
  • Ralph Lauren Poised for Growth, Buy After a Pull Back

    Out of all the higher-end apparel brands, Ralph Lauren (RL) is the most poised for growth entering 2012.  RL has laid out plans for massive expansion, while at the same time increasing control over their brand image and distribution.  Although future growth is apparent, the market might have over zealously factored in the potential. The main points to discuss are:
    ·      Expansion plans for Europe and Asia as the standard of living improves for the latter
    ·      E-commerce expansion through introductions of shopping sites in European countries and throughout Asia
    ·      Restructuring in Asia to improve brand image and recognition
    ·      License reacquiring to regain more control over their brands
    ·      Expanding product line with focus on higher margin products with weak market share
    ·      Natural price and economic hedge due to their consumer’s socio-economic class
    ·      Despite short-term pressure due to restructuring costs, RL has strong fundamentals that will carry it through their expansion plans
    ·      Price is getting a little ahead of growth and therefore I recommend waiting for a sell off before stepping in

    Keeping all these factors in mind, I believe that RL is a remarkable long-term play.

    Check out the rest of the article here: http://fundamentalhedgie.tumblr.com/
    Tags: RL, COH, Retail, Apparel, Long-Term, Consumer Cyclical
    Jul 12 3:13 PM | Link | Comment!
  • What the DOE's Regulations Mean for the For-Profit Education Industry
    Today the Department of Education released the final version of the rules governing the standards that for-profit colleges and universities have to follow in order to maintain eligibility for Title IV funding.  The regulatory act gives three criteria that the educators must follow in order for their students to receive government education loans.  First they must have 35% of students repaying loans.  Second the estimated annual load repayment of a typical graduate can not exceed 30% of his or her discretionary income.  Third the estimated loan repayment must also not exceed 12% of a graduate’s total earnings.  Educators aren’t held to these criteria until 2015 and they are given 3 chances to pass at least one criteria for the four years.  All of this regulation has been implemented to ensure that students who graduate from these universities are actually getting jobs that pay them enough so that they can then repay loans.  A common opinion of this type of education is that it is sub-par and therefore limits the students employment prospects.
    Now the reason that education shares are flying high today is that these criteria are much less strict than the original standards.  Some of the differences are that, originally, at least 45% of students must be repaying their loans to be eligible, the estimated annual loan repayment must be less than 20% of discretionary income and less than 8% of total income.  As you can see these rules would have been much stricter and could have possibly resulted in more for-profit educators failing.  Despite the easing of the regulations, the DOE expects 18% of educators to fail the criteria at some point and about 5% to fail by 2015 and have their eligibility for Title IV grants revoked.
    Alright so, based on the revised regulations, now we have to answer the inevitable question, cui bono.  To be honest basically everyone in for-profit education benefits from the eased policy.  At least investors seem to think so; I created a mock portfolio with the “best” 14 education stocks in it and there is not one down today.  The stock the worst off is American Public Education, Inc (APEI) who is up ~1.30% at the time of this writing.  The best is Corinthian Colleges, Inc (COCO) who is up ~29.3% at the time of this writing.  Bank of America (BAC) contributed to the fray after upgrading DeVry (DV) to buy from neutral and upgrading Education Management (EDMC) to neutral from underperform.  

    Symbol        Last price     Change %
    EDMC            24.91            4.61
    CECO            24.1              1.23
    WPO             426.5             20.54
    LINC             15.84             1.25
    COCO           5.15              1.16
    BPI                24.23             0.55
    STRA            142.33           20.46
    ESI                82.72            11.99
    APOL            46.4               4.21
    DV                61.04             7.05
    LOPE            14.1              1.28
    APEI             44.01             0.51
    CPLA            50.05             2.07
    NAUH            8.06              0.5

    Specifically the change from a debt-to-earnings calculation for students repayment is changed from 10 years for everyone to a tiered plan that favors more advanced degrees with a longer repayment period.  This helps educators that are BA and MA heavy as it extends the amount of time a student can repay loans, allowing for lower individual repayments and therefore increasing the chances of successful repayment.  Schools with such exposure are Apollo Group Inc (APOL), Bridgepoint Education Inc (BPI), Capella Education Company (CPLA), DV, EDMC, Grand Canyon Education Inc (LOPE) and Strayer Education Inc (STRA).
    This is all a perfect example of why you should wait to trade on news until after you have all the facts.  At first glance the introduction of new regulations would seem to be a negative catalyst.  This would indeed be the case had the released regulations not been a watered down version of the originals.  If you are interested in the beginning of this saga I encourage you to check out a speech given by Steven Eisman (yes, that guy from The Big Short) on the scourge that is the for-profit education industry.
    Now the question is what will happen in the future.  I think that people are going to realize that they bought education stocks that still have had strict regulation introduced and will sell off into the high prices today and tomorrow.  By no means do I think that the 29% and 23% gains shown by COCO and EDMC will all be given back but a good chunk will.  Today was a massive trading day for these stocks.  I would want to listen to the quarterly earnings reports scheduled in late summer to see what the CEOs have to say about their prospects facing the new regulations before I jump on board.
    Tags: APEI, APOL, BPI, CECO, COCO, CPLA, DV, EDMC, ESI, LINC, LOPE, WPO, BAC, For-Profit Education
    Jun 02 3:21 PM | Link | Comment!
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    Jul 24, 2011
  • Check out my new article about JOSB. I think that this retailer is ready to take off. http://seekingalpha.com/a/60gw
    Jul 20, 2011
  • Collective brands upgraded to a buy from neutral. The article can be read here: http://bit.ly/nX0jsQ
    Jul 20, 2011
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