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No. of Recommendations: 2
Hi all,

Way back when I first started picking my own stocks, I made repeated attempts to solicit input from my wife. I tried to follow Lynch's advice and to get her to spot new and busy retail stores that she might come across. Nothing. Not one suggestion. Other attempts failed miserably too. She has absolutely no interest in investing or finance period. They say opposites attract . . . .

Anyway, the other day totally out of the blue she tells me that "at home schooling/classes" are the new up and coming trend and that I should find a stock of a company that develops these programs.

This is so far out of my circle that I'm at a loss of where to begin. I'm aware of MHP and Apollo but don't think either of those two are really what she's thinking about.

Any suggestions? Anything at all?

Thanks in advance,

Rich
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No. of Recommendations: 3
Have you seen this company before? They're sort of related to the home-school trend.

http://www.k12.com

No position, or opinion.
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No. of Recommendations: 4
Rich:

Here are a few companies you could research:

INDUSTRY CENTER - EDUCATION & TRAINING SERVICES
http://biz.yahoo.com/ic/766_cl_pub.html

Industry Browser - Services - Education & Training Services - Company List
http://biz.yahoo.com/p/766conameu.html

Denny Schlesinger
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No. of Recommendations: 3
Rich,

Familiarize yourself with Kahn Academy. Then note that it is free.

While I do own some K12, and have read Christensen's 'Disrupting Class' (his most disappointing book IMO), I don't think a consensus winner is likely to be found in an intentionally independent arena like home schooling.

TMFHelical
Home Coverage Fool
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Thanks guys. K12 is new to me. They all are.

Helical, the thesis has nothing to do with home schooling. The idea is that public education will begin to adopt e-schooling on a large scale as a way to be more efficient. I admit that its likely a long shot to say the least. On the surface I can see the potential, though. Money spent on bricks and mortar, teacher salaries and benies could be redirected to things more pressing like SS and medicare if students could simply fireup their laptops and be in a learning environment. It kinda fits with the Fed's one-size-fits-all approach to schooling too. I'm sure the teachers unions will have objections. But, if tax payers have a say on the matter the idea might just gain some traction someday.

I'm not an advocate of the idea. Many in my family are teachers. Still, the potential is huge.

Rich
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No. of Recommendations: 5
"at home schooling/classes" are the new up and coming trend and that I should find a stock of a company that develops these programs.

This is so far out of my circle that I'm at a loss of where to begin. I'm aware of MHP and Apollo but don't think either of those two are really what she's thinking about.

Any suggestions?


Rich,

I don't have a stock suggestion but I agree that there might be an enormous opportunity in the educational sector. Have a look at the TED featuring Salman Khan, http://www.khanacademy.org/video/salman-khan-talk-at-ted-201..., if you haven't seen it already. He is getting support from the Gates Foundation to make his online seminars available to schools. The basic idea is that teachers currently teach seminars to classes whose individual students have quite different needs, concentration levels, needs for repetition, etc, then they are supposed to go home and do homework (exercises) but don't usually do it. Their idea is to reverse this: have kids do the seminar teaching online at home, basically going through learnings modules at their own pace, and do the homework at school, under the teacher's supervision. The job of the teacher becomes to make sure the kids are doing their homework and progressing through the modules, identify stumbling blocks, get other kids mentoring the ones that are just behind them, etc.

The big stumbling block, in my opinion, is that schools, particularly public schools, are much more interested in the teachers' and administration's needs than in kids' needs, and it will be hard to get any useful initiatives adopted. Home schooling, or home teaching as a supplement to bad public schools, or extra-curricular catch-up sessions, or even voucher schools or private schools using modern techniques, hold a lot of opportunity, with basically huge market share there for the taking. One place to think about, in a beaten down sector, is the for-profit educational companies, to the extent that you can find one that is not basically a scam operating off lax governmental student loan programs. Maybe WPO? But I don't know of any of them that are actually marketing a program that would help primary or secondary students do well.

Anyone have any ideas along these lines? I don't particularly want to argue about the adequacy/inadequacy of schools, or whose fault it all is, but would love to hear more about potentially investable public company initiatives in this sector.

Regards, DTM
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I think the concept of a Khan academy has great potential, but when I viewed his elementary level math videos, it was clear that he has no clue on how effectively instruct that age group.

Tom
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Yes, I agree that the actual content leaves something to be desired. It is the concept I like, and its potential. What we need is a sort of WikiLearning, with content from people like Khan but not just Khan, and perhaps with some sort of rating system. Not to mention things like language preferences and other preferences a learner might have.

But developing software that lets teachers see where kids are up to, how fast they are progressing, what kinds of things are holding them up, who else in the class had similar problems that they got through, who could mentor a kid, etc., that sounds wonderful. I think such a module would be great for parents, too, especially parents like me that are stuck with a bad school in a one school town...

Regards, DTM
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Another thing on rise is the distance learning. How about those companies that produce distance learning tools, such as BlackBoard (BBBB). (Blackboard bought out Wimba not long ago and itself was bought out by someone else recently. looks like integration within this sector.) Last time, our university host a forum for all the faculties to exchange their user experience. Surprisingly, there were even teachers from the University owned middle school and preschool.

Bin
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Yes, Blackboard got taken out by a private group. Funny for a company that is a "leading provider of enterprise learning software applications and related services" still has an investor relations tab on their site, with a stock quote and everything, even though their Q2 earnings report also mentions that "On July 1, 2011, Blackboard announced that it had entered into a definitive merger agreement under which Blackboard will be acquired by an affiliate of Providence Equity Partners in an all-cash transaction. Pursuant to terms of the agreement, Blackboard shareholders will receive $45.00 in cash for each share of common stock."

$1.6 billion dollars seems a little pricy for a company making a small loss on about $500 mn in revenues, but that's the problem with this sort of story stock. That may be the problem with the concept in general, of looking for a stock on the basis of a general thesis...

Regards, DTM
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"That may be the problem with the concept in general, of looking for a stock on the basis of a general thesis..."

It is funny that Lynch and his book are most remembered for this idea of buying what you know (before it is well known). I have found great value in Lyches book but not so much in this idea.

My preferred approach is to scan Value Line for companies with the right financial pattern as a first step. See my web site for the details on the pattern. Then dig into the long term sustainability of the business, managment etc. If you happen to stumble on a business that you know about that is great but certainly not necessary or that common. I have found almost all of the great ones (Atrion, Cass, Neogen, Genlyte etc.) in this way.

sw
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It is funny that Lynch and his book are most remembered for this idea of buying what you know (before it is well known). I have found great value in Lyches book but not so much in this idea.


I like the idea, but I'm not so sure it works better than any other approach. But if it is used, it is important to make sure you are not buying into they hype when the fundamentals don't make sense. Looking for the stock which fits a thesis (distance learning, for example) will usually lead you to companies that don't qualify by value criteria, just because most companies don't, and also perhaps because if you like the thesis, there are probably thousands of other people who have also bought into the thesis, without regard to price, so it's even worse.


My preferred approach is to scan Value Line for companies with the right financial pattern as a first step. See my web site for the details on the pattern.


Yes, this makes a lot more sense to me. Unfortunately, value will usually push you in the direction of companies that make boring products or that are hated by others. The choice is often to own sexy stocks with bad returns, or boring stocks with sexy returns. I'll take boring, then.

Regards, DTM
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It is funny that Lynch and his book are most remembered for this idea of buying what you know (before it is well known). I have found great value in Lyches book but not so much in this idea.

I'm a Lynch fan and I don't think that "buy what you know" is his central theme. I take this more as a negative as in "avoid what you don't know." For me the main theme of finding ten baggers is discovering businesses that can be replicated across markets. In practice for me this is usually retailers that have plenty room to grow, for example Lululemon. In high-tech it might be Mitek leveraging the adoption of smart phones and ARM leveraging low power mobile devices. In medical robots it's MAKO expanding to hips.

Denny Schlesinger
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Hi DTM and all,


it is important to make sure you are not buying into they hype when the fundamentals don't make sense. Looking for the stock which fits a thesis (distance learning, for example) will usually lead you to companies that don't qualify by value criteria, just because most companies don't, and also perhaps because if you like the thesis, there are probably thousands of other people who have also bought into the thesis, without regard to price, so it's even worse.


Yes. But that's not to say that someday in the future a particular stock might become attractively priced in the market and offer an opportunity for purchase. If it’s operating in an industry having attractive fundamentals and long term growth prospects, that’s all the better. Like Lynch, Fisher was a very competent growth investor and in "Common Stocks, Uncommon Profits" he gives his 15 points as an aid to identifying quality ideas. The way I would approach it is that once an idea is found, it then becomes a waiting game for the shares to be offered at an attractive price.

I’ve worked through Denny’s Yahoo listing and based on a read of each company’s profile have determined that K12 (LRN), that enoch mentioned, is the only publicly traded company that seems to fit the thesis. The vast majority of the others seem concentrated in two camps: US higher education and China based.

Interestingly, LRN recently missed analyst’s estimates in its latest Qtr and has sold off about 22% in the past week. But, at 60x eps it probably is a little pricey still. I plan to kick the tires and see what I can learn.

Khan Academy offers an abundance of videos, many of which relate to investing, including topics on valuation, banking and money, the credit crisis, currency, economics, finance, and the "Geitner Plan" complete with a "Better Solution." These all appear to be free and no registration required. I've earned 3 badges already. I plan to spend some more time here:

http://www.khanacademy.org/

Rich
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Interestingly, LRN recently missed analyst’s estimates in its latest Qtr and has sold off about 22% in the past week. But, at 60x eps it probably is a little pricey still. I plan to kick the tires and see what I can learn.


Certainly worth following. It's interesting that the chairman of the board is Andrew Tisch, of the Tisch family that controls Loews, a very successful conglomerate with some resemblance to Berkshire Hathaway. On the negative side $3 million in pay for the CEO seems a little excessive for a company with revenues of $500mn, especially for the founder of the company who probably has a pretty big equity stake.


Khan Academy offers an abundance of videos, many of which relate to investing, including topics on valuation, banking and money, the credit crisis, currency, economics, finance, and the "Geitner Plan" complete with a "Better Solution." These all appear to be free and no registration required

Yes, lots to learn there, and the price is right. Khan has certainly created a lot of name recognition by giving these clips away, although the formula is pretty limited. What I mean is that Salman Khan's opinion is worth considering, but an Academy should strive to be more than a one-man show, however well informed that one guy may be. I would like to see some more lecturers, with some way of rating the lectures and continually improving them, a la Wikipedia perhaps. Seems like a good project for Google...

Regards, DTM
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An interesting overview of the industry and K12 in particular:

http://www.cnbc.com/id/44255406

Rich
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had his jaw wired shut for several months and could not talk to the class

Sometimes this is mot a negative

excellent point about the difficulties in waiting and not buying just for something to do
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K-12 is taking it on the chin (off over 20%) as a result of a hit piece from the NY Times:

Here's the response:

http://finance.yahoo.com/news/K12-Inc-Statement-New-York-prn...

And, the NY Times article:

http://www.nytimes.com/2011/12/13/education/online-schools-s...

Rich
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No. of Recommendations: 5
Rich:

The Gorilla Game holds that complexity is the enemy of adoption. For example, Stereotaxis (STXS) has a great product that improves access to the heart but you have to build a new Rx lab in the hospital to be able to install it. This requirement kills STXS as an investment, despite it being a great product.

Unfortunately, private education is in competition with public education and its powerful labor unions as well as in competition with the "free" education movement. I wonder if these issues are sufficient to make one look elsewhere to invest.

BTW, LRN has an uneven earnings history, both on a quarterly basis (which would be attributable to the cyclic nature of enrollment) but also on an annual basis which would worry me. Do they have expenses under control?

Denny Schlesinger
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Hi Denny,

Yeah. LRN also hands out options to management a little (ok, a lot) more than I'd like to see.

No divi.

Tough to get excited about it.

Rich
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LRN continues to fall
Some concern that it is at heart a poorly run business with unhappy employees

The following is a link to a New York Times expose
Have not had time to read the whole thing yet but it looks bad

http://www.nytimes.com/2011/12/13/education/online-schools-s...
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With free online college education from MIT is for pay online education still a business?


M.I.T. Game-Changer: Free Online Education For All

For Wall Street Occupiers or other decriers of the “social injustice” of college tuition, here’s a curveball bound to scramble your worldview: a totally free college education regardless of your academic performance or background. The Massachusetts Institute of Technology (M.I.T.) will announce on Monday that they intend to launch an online learning initiative called M.I.T.x,which will offer the online teaching of M.I.T. courses free of charge to anyone in the world. The program will not allow students to earn an M.I.T. degree. Instead, those who are able to exhibit a mastery of the subjects taught on the platform will receive an official certificate of completion. The certificate will obviously not carry the weight of a traditional M.I.T. diploma, but it will provide an incentive to finish the online material. According to the New York Times, in order to prevent confusion, the certificate will be a credential bearing the distinct name of a new not-for-profit body that will be created within M.I.T.


http://www.forbes.com/sites/jamesmarshallcrotty/2011/12/21/m...

Denny Schlesinger
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With free online college education from MIT is for pay online education still a business?

I'm guessing that we're talking about different target markets. And if we're not, the community colleges are in even bigger trouble than the for profits.
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