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New School Intelligence & Skills Investing

|Includes:APOL, BPI, Career Education Corporation (CECO), DL, DV, EDU, EPAX, ESI, LTRE, NLCI, STRA
Buying Into New School Education and Training

This week I’m buying into the education theme with a low-risk high-reward school stock pick. Career Education Ticker CECO. With unemployment high in the USA and Europe and most likely staying high for some time to come in my opinion, the new jobs coming later will need people with refined and new skills. Education and training companies have the potential to do very well for possibly sometime to come.

Zacks Investment Research

Zacks has a #1 Rank “Strong Buy on Career Education from their investment research. Technically it looks to still be a good buy. Near term CECO could be under pressure. Intermediate and long term, CECO looks like it has more upside potential with it’s big earnings estimates being forecasted.

Earnings Estimates

Analysts have been increasing their estimates on Career Education earnings for 2010, with average quarterly forward earnings estimates as follows. March 2010 $0.64, June 2010 $0.57, and yearly forward earnings estimates at $2.65 for 2010 $2.65, and $3.16 for 2011. CECO has a good past performance of beating analysts earnings expectations.

Increasing Revenues in a Bad Economy

Career Education is doing good in a bad economy with new students and revenues increasing double digits in 2009. CECO current price-to-book ratio is 2.53. Currently they have operations U.S. and Canada, France, Italy and the U.K. where unemployment is high, and new school education skills are needed for the future.

For the last quarter 2009, Career Education posted a healthy 19.4% growth in revenues to $507.8 million from $425.3 million in the prior year quarter. The increase in revenues was mostly due to a 21% growth in their student population to 116,800, which included a 27% growth in online enrolments to 46,200 students.

The Bad and the Good

As a negative, operating expenses for CECO went up by 9.4% year over year to $410.8 million mostly due to a 12.1% increase in educational services and facilities expense to $166.8 million combined with an 8.0% increase in general and administrative expenses to $226.7 million. On the positive side, the top-line growth was more than to offset the increase in operating expenses. The bottom line, Career Education posted a very respectable 95.4% growth in operating income to $97.0 million from $49.6 million in the year-ago 4th quarter 2009.

Positive Cashflow and Share Buyback Program

Career Education ended the last quarter of 09 with cash and cash equivalents of $284.5 million, compared to $242.9 million of cash in the year-ago period. During 2009, CECO allocated $201.1 million for a share buyback program and $74.1 million towards capital expenditure.

Short Intermediate Long Term Price Forecast

Near term CECO could be under pressure. Intermediate and long term, CECO looks like it has more upside potential with it’s big earnings estimates being forecasted. If new enrollments stay strong, the stock price could stay strong also.

Analysts Where Positive with Some Now Negative

Some analysts are recommending to short CECO currently. I see a short squeeze possibly coming on it if the broad market moves higher, and with interest rates staying low, looks like the broad market can easily grind higher takeing CECO with it. Owning schools like Career Education is a no-brainer right now I think, especially in times like this that look like they may be around for awhile.

Trading Range Before Into a Breakout Now

CECO has basically been in a 18 to 25 trading range for the last year, with a recent breakout to new 52 week highs as of March 04, 2010. I’m betting the breakout will stick and we can see higher prices per my trade plan below. In case it doesn’t, stick to stop-loss.

1st Quarter 2010 Earnings Report Announcement

Career Education earnings report is coming out May 6th at 10AM. Until then, I’m betting we can still see a continued upside move on Career Education.

Buy Long Career Education – Ticker CECO

Buy Entry: 30.80 to 31.76

Stop-Loss: 28.87

Take Profit Areas: 35.78 to 37.25, 38.64 to 40.19, 41.49 to 43.16

Career Education Company Profile

Career Education Corporation, through its subsidiaries, provides educational services primarily in the United States. The company operates schools, colleges, and universities that offer doctoral degree, master’s degree, bachelor’s degree, and associate degrees, as well as diploma and certificate programs in various career oriented disciplines. Its academic programs include career oriented disciplines, such as business studies, visual communications and design technologies, health education, information technology, and criminal justice and education in an online, classroom, or laboratory setting; and culinary art programs in the career-oriented disciplines of culinary arts, baking and pastry arts, and hotel and restaurant management primarily in a classroom, kitchen, or online setting. Career Education also offers health education academic programs complemented by programs in business studies and information technology in a classroom, laboratory, or online setting; and arts and design academic programs in the disciplines of fashion design, game design, graphic design, interior design, film and video production, and photography and visual communications in a classroom, laboratory, or online setting. The company provides education to approximately 116,000 students through approximately 90 campuses. It also operates in France, Italy, and the United Kingdom. Career Education Corporation was founded in 1994 and is headquartered in Hoffman Estates, Illinois.

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Career Education Stock Chart

Disclosure: No Positions: Gong Long Per Trade Plan Above