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COCO Puffs?

|Includes:APOL, Corinthian Colleges, Inc. (COCO)

COCO has been on a roller coaster for the past two months. After hitting a 52-week low of $4.23 in late August, COCO climbed to $7.19 the first week of October. Now it’s come full circle and is back down to $4.51.

This is the result of regulatory uncertainty, management decisions, and speculation. Two months ago, worries about the Department of Education’s new rules restricting student loans to COCO (and all for-profit school) students was the only thing dictating stock prices. Then on September 25th, the stock was thrown a bone. The Dept. of Education announced that their ruling on for-profit colleges would be delayed, as reported by Bloomberg. This would prove to be the news that drove COCO to its recent highs.

More recently, COCO has been pummeled by unexpected bad news. First, the COO jumped ship on October 12th (AP). The next day, Apollo Group rattled the industry by withdrawing guidance and warning of declining enrollment as they prepare for the Dept. of Education’s stricter regulations (Bloomberg). The final straw came yesterday as COCO itself announced tuition hikes and dropping enrollment (Reuters)

Too bad I had them picked as a diamond in the rough and bought options. Now things are ugly and looking worse. While COCO was a cash cow, those days may be over, as the whole industry is dependent on 80-90% of revenues for Dept. of Education regulated student loans. Who knows what the industry will be worth in the  
future.Ouch. Should have sold them in October. And the moral of the story is: When the market throws you a bone (as it did with the Dept. of Ed. ruling delay), Take It!



Disclosure: no positions
Stocks: COCO, APOL