In this piece, we will take a look at the ten best education stocks to buy in 2022.
The outbreak of the coronavirus delivered the greatest shock to a host of industries and nearly every economy all over the globe, as populations, businesses, and governments were caught unaware. However, it also resulted in the disruption of several sectors and breathing life into new ones, as the greater reliance on technology led to traditional sectors embracing change.
One such sector is the education sector which saw a massive shift to distance learning. While major stock markets crashed, share prices of video conferencing companies rose, as not only companies but universities and schools shifted online to deliver their services.
In the aftermath of the coronavirus, we’re seeing a lot of optimism about the education market. For instance, a research report from Holon IQ, which takes a look at secondary and post secondary education, estimates that these sectors will be worth a whopping $10 trillion by 2030. It estimates that by 2030, more than 350 million post secondary and a whopping 800 million K-12 level graduates will complete their education, and the change will be driven by Asia and Africa providing more education to their populations.
Another report, this time from Fortune Business Insights, analyzes the global higher education technology market. It wagers that the sector was worth $77.66 billion in 2020, and through growing at a compounded annual growth rate of 10.3%, it will sit at $169 billion by 2028-end. A key factor behind this growth is the larger adoption of technology, with the digitization of services leading the change. The United States will lead this change, as the presence of some of the world’s largest and leading institutions will see them drive the adoption of new technologies.
Finally, Vantage Market Research further narrows down the focus on the global U.S. education market. It estimates that this sector was already worth $1.2 trillion in 2021, and it will grow at a CAGR of 4.3% to sit at $1.5 trillion in 2028. It touts the rise of online learning as the key factor behind this growth, citing factors such as user flexibility and convenience contributing to its popularity.
Our list today combines a host of firms ranging from those that own universities to those that facilitate online learning. Out of them, the renowned names are Adtalem Global Education Inc. (NYSE:ATGE), Chegg, Inc. (NYSE:CHGG), and Bright Horizons Family Solutions Inc. (NYSE:BFAM).
Photo by Compare Fibre on Unsplash
Our Methodology
We scanned Insider Monkey’s database of 895 hedge funds and picked the top 10 stocks that are operating in the education industry.
10 Best Education Stocks to Buy In 2022
10. First High-School Education Group Co., Ltd. (NYSE:FHS)
Number of Hedge Fund Holders: 1
First High-School Education Group Co., Ltd. (NYSE:FHS) is a Chinese private high school operator. The company provides fundamental and complementary education services and it is headquartered in Kunming, China.
First High-School Education Group Co., Ltd. (NYSE:FHS)’s first half of 2022 revenue grew by 21% annually, at a time when the broader Chinese economy was struggling with the hide and seek of coronavirus lockdowns. This growth was fueled by a 9.6% increase in student enrollment in the company’s latest school year, and during the time period, First High-School Education Group Co., Ltd. (NYSE:FHS) also expanded its portfolio to offer other services such as meals and coursebooks.
First High-School Education Group Co., Ltd. (NYSE:FHS) also reduced its operating expenses by 37% during the quarter, and the firm has a 100% liquid checking account backed by China’s largest banks. The latter fact provides it with great flexibility during potential economic turmoil.
First High-School Education Group Co., Ltd. (NYSE:FHS) has only one investor in our database of 895 hedge funds.
Along with Chegg, Inc. (NYSE:CHGG), Adtalem Global Education Inc. (NYSE:ATGE), and Bright Horizons Family Solutions Inc. (NYSE:BFAM), First High-School Education Group Co., Ltd. (NYSE:FHS) is a hot education stock.
9. Pearson plc (NYSE:PSO)
Number of Hedge Fund Holders: 6
Pearson plc (NYSE:PSO) is one of the most well-known textbook brands in the world. Headquartered in London, the United Kingdom, the company also offers other services such as online learning, workforce skills, and higher education such as the British A and O level qualifications.
Pearson plc (NYSE:PSO)’s revenue and operating income grew by 6% and 22% annually by the end of this year’s first half, implying that the company was on its road to recovery from the coronavirus shock. The firm also aims to reduce its operating expenses by £100 million in 2023.
Deutsche Bank increased Pearson plc (NYSE:PSO)’s share price target to GBp1,140 from GBp900 in October 2022, alongside keeping a Buy rating on the shares. Six out of the 895 hedge funds polled by Insider Monkey for their Q2 2022 investments had held a stake in the company.
Out of these, Kenneth Squire’s 13D Management is Pearson plc (NYSE:PSO)’s largest investor. It owns 810,659 shares that are worth $7.4 million.
8. Afya Limited (NASDAQ:AFYA)
Number of Hedge Fund Holders: 7
Afya Limited (NASDAQ:AFYA) is a Brazilian medical education company. The firm provides medical education and products and services such as graduate courses, medical schools, and residency preparatory courses to learners enrolled in its network and with third party firms. It is headquartered in Nova Lima, Brazil.
Afya Limited (NASDAQ:AFYA) is one of Brazil’s largest and most successful medical schools. The firm is responsible for filling 8% of the entire country’s medical seats, generates 80% of its revenue through for profit undergraduate universities, and has strong 50% gross margins. Additionally, its students are also quite successful, with 97% finding employment after graduation.
Afya Limited (NASDAQ:AFYA)’s second quarter revenue grew by 20% annually and the firm had 100% occupancy across all of its schools in the quarter. By the end of this year’s second quarter, seven out of the 895 hedge funds polled by Insider Monkey had bought its shares.
Afya Limited (NASDAQ:AFYA)’s largest investor is Howard Marks’ Oaktree Capital Management which owns 1.5 million shares that are worth $15 million.
7. Laureate Education, Inc. (NASDAQ:LAUR)
Number of Hedge Fund Holders: 14
Laureate Education, Inc. (NASDAQ:LAUR) is a higher education services provider that provides both graduate and undergraduate programs in the United States. These cover a host of different fields such as medicine, business, and engineering. The firm is headquartered in Miami, Florida.
Laureate Education, Inc. (NASDAQ:LAUR) is taking a strong approach toward online learning, as it aims to teach as much as 60% of its courses online over the next couple of years. It is also recovering from the coronavirus pandemic, as its enrollment figures for June 2022 have shown an 11% annual growth. The firm also beat its revenue and operating guidance during its second fiscal quarter, by posting $385 million and $144 million in the segments, respectively.
Additionally, by the end of the current fiscal year, Laureate Education, Inc. (NASDAQ:LAUR) expects to rake in $1.2 billion in revenue. Insider Monkey’s Q2 2022 survey of 895 hedge funds revealed that 14 had held a stake in the company.
Laureate Education, Inc. (NASDAQ:LAUR)’s largest investor is Peter S. Park’s Park West Asset Management which owns 2.2 million shares that are worth $26 million.
6. 2U, Inc. (NASDAQ:TWOU)
Number of Hedge Fund Holders: 15
2U, Inc. (NASDAQ:TWOU) provides degree programs and alternate credentials to students seeking graduate and undergraduate degrees all over the globe. It works with non profit colleges and universities. 2U, Inc. (NASDAQ:TWOU) is headquartered in Lanham, Maryland, the United States.
Despite recent turmoil and misfortune, 2U, Inc. (NASDAQ:TWOU) is one of the world’s two largest online education providers, alongside Coursera. It completed a deal to acquire the online education platform edX earlier this year, with the latter having partnered up with some of the largest universities in the world for programs that act as a substitute for their credits. One such program is offered by the Massachusetts Institute of Technology (MIT).
Additionally, 2U, Inc. (NASDAQ:TWOU) is also rumored to be acquired by an Indian company for a whopping $1 billion buyout, all in cash and valued at $15 per share. The firm is currently trading at $4.72 per share, and should the deal materialize, the share price could get a nice kick upwards. edX has also partnered with Google to launch an online certification program that aims to bring learners to speed with Google’s requirements. By the end of this year’s second quarter, 15 out of the 895 hedge funds polled by Insider Monkey had invested in the firm.
2U, Inc. (NASDAQ:TWOU)’s largest investor in our database is Catherine D. Wood’s ARK Investment Management which owns 9.5 million shares that are worth $89 million.
2U, Inc. (NASDAQ:TWOU) is a strong education stock, joining the likes of Adtalem Global Education Inc. (NYSE:ATGE), Chegg, Inc. (NYSE:CHGG), and Bright Horizons Family Solutions Inc. (NYSE:BFAM).
5. Adtalem Global Education Inc. (NYSE:ATGE)
Number of Hedge Fund Holders: 18
Adtalem Global Education Inc. (NYSE:ATGE) is a workforce solutions company that provides degree and non degree programs such as bachelor’s, master’s, and doctoral degrees to healthcare, nursing, and veterinary students. The firm is headquartered in Chicago, Illinois, the United States.
Adtalem Global Education Inc. (NYSE:ATGE) is one of the few stocks that have rallied throughout the course of this year despite the bloodbath in all major indexes. Year to date, the company’s shares have appreciated by 25% on the stock market. The company’s Chamberlain University is the largest nursing school in America, and it has the lowest student loan default ratio among American universities.
Adtalem Global Education Inc. (NYSE:ATGE)’s fiscal year 2022 saw its revenue grow by 53% and earnings per share by 40%. Insider Monkey studied 895 hedge fund portfolios for this year’s second quarter to discover that 18 had owned a stake in the company.
Out of these, John W. Rogers’ Ariel Investments is Adtalem Global Education Inc. (NYSE:ATGE)’s largest investor. It owns 178 million shares that are worth $178 million.
4. Grand Canyon Education, Inc. (NASDAQ:LOPE)
Number of Hedge Fund Holders: 23
Grand Canyon Education, Inc. (NASDAQ:LOPE) provides a host of services to American universities and colleges. These include academic services, learning management services, faculty training, class scheduling, and others. The firm is headquartered in Phoenix, Arizona.
Grand Canyon Education, Inc. (NASDAQ:LOPE) has one of the strongest gross margins in the industry, with the latest reading placing the metric at 55.5%, nearly two percentage points higher than the five year average. Additionally, the firm’s management is optimistic about future share price growth, as despite $76 million in second quarter operating cash flow, it chose to buy back $128 million worth of shares.
Grand Canyon Education, Inc. (NASDAQ:LOPE)’s shares have dropped by only 3% year to date, holding their ground against broader market sell offs. Insider Monkey’s 895 hedge fund survey for this year’s second quarter revealed that 23 had owned the company’s shares.
Out of these, Cliff Asness’ AQR Capital Management is Grand Canyon Education, Inc. (NASDAQ:LOPE)’s largest investor. It owns 394,101 shares that are worth $36 million.
3. Stride, Inc. (NYSE:LRN)
Number of Hedge Fund Holders: 23
Stride, Inc. (NYSE:LRN) provides proprietary and third party curricula, online learning, software systems, and educational services to K-12 schools in the United States. The firm is headquartered in Reston, Virginia.
Stride, Inc. (NYSE:LRN) is one of the largest K-12 technology learning solutions in the U.S. The company’s fiscal fourth quarter earnings saw its revenue grow by 15%, which was impressive not only on its own but particularly so since 2021 had proved to be a record year for Stride, Inc. (NYSE:LRN) in the aftermath of the coronavirus pandemic.
Stride, Inc. (NYSE:LRN)’s shares are up by a whopping 39% year to date, as they build upon the impressive earnings results. By the end of this year’s June quarter, 23 out of the 895 hedge funds polled by Insider Monkey had invested in the firm.
2. Bright Horizons Family Solutions Inc. (NYSE:BFAM)
Number of Hedge Fund Holders: 23
Bright Horizons Family Solutions Inc. (NYSE:BFAM) is an American company that provides childcare and early education services to employees of different companies. These include both in home and center based childcare. The company is headquartered in Newton, Massachusetts.
Bright Horizons Family Solutions Inc. (NYSE:BFAM) is a company with an eye on the long term through multi year contracts, and its latest earnings results revealing that enrollment grew by as much as 3%, tuition rates by 4%, and its tuition centers by 2%. The firm focuses on deep relationships with its customers, that lets it retain pricing powers.
Additionally, Bright Horizons Family Solutions Inc. (NYSE:BFAM) has also acquired roughly 400 childcare centers in the U.S., the U.K., and the Netherlands over this decade, which has enabled it to grow its footprint in the developed economies. Its revenue guidance of 20% growth for the fiscal year 2022 suggests that the firm is recovering from the coronavirus shock. Insider Monkey’s Q2 2022 survey of 895 hedge funds revealed that 23 had held a stake in Bright Horizons Family Solutions Inc. (NYSE:BFAM).
Jack Woodruff’s Candlestick Capital Management is Bright Horizons Family Solutions Inc. (NYSE:BFAM)’s largest investor. It owns 450,000 shares that are worth $38 million.
Artisan Partners mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“Bright Horizons Family Solutions Inc. (NYSE:BFAM) is a leading provider of corporate-sponsored childcare and early education centers in the US. The company primarily provides services through multi-year contracts with employers who offer childcare, early education and other dependent care benefits to employees. Over the course of our investment campaign, which began in 2014, the company’s capital efficient business model has experienced a high degree of revenue growth, and it has made several accretive acquisitions. Unfortunately, it remains uncertain whether the company’s network of centers is well matched to the working patterns of parents post-COVID. Namely, work from home could hinder growth in corporate-sponsored childcare centers. These variables, coupled with shares approaching our PMV estimate, led us to end our investment campaign.”
1. Chegg, Inc. (NYSE:CHGG)
Number of Hedge Fund Holders: 25
Chegg, Inc. (NYSE:CHGG) is an American company that offers students a host of different services such as help with homework assignments, textbooks, plagiarism detection scans, citation generation, and writing feedback. The firm is headquartered in Santa Clara, California.
Chegg, Inc. (NYSE:CHGG)’s revenue has more than doubled over the past five years, with the latest reading of $776 million growing by more than 200% over the $255 million in revenue that it brought in 2017. Its subscribers have also grown by more than fourfold during the same time period, from 2.2 million to 7.8 million.
Needham upgraded Chegg, Inc. (NYSE:CHGG)’s share price rating to Buy in September 2022, as it stated that the company is expanding well internationally and maintaining its American user base at the same time. As part of their investment portfolios, 25 out of the 895 hedge funds surveyed by Insider Monkey during 2022’s June quarter had invested in the firm.
Chegg, Inc. (NYSE:CHGG)’s largest investor is Jim Simons’ Renaissance Technologies which owns 2.4 million shares that are worth $46 million.
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Disclosure: None. 10 Best Education Stocks to Buy In 2022 is originally published on Insider Monkey.
