Why it May be Time to Give Education Stocks Another Chance

Adtalem Global Education Inc (NYSE:ATGE)

Adtalem Global Education Inc (NYSE:ATGE), formerly known as DeVry, has rebounded by 50% since the middle of 2017 and it appears that there’s more room yet to run for the stock. Enrollments have improved after the recent struggles mentioned on the previous page, as have margins, which are helping to jumpstart earnings growth despite modest revenue growth (1% in the fourth-quarter, which was the company’s fiscal 2018 second-quarter). 10.9% revenue gains in the Professional Education division during the fourth-quarter helped offset 10.5% declines in the company’s Traditional Education division.

At the end of 2017, Adtalem Global Education Inc (NYSE:ATGE) was held by 20 of the hedge funds in our database, a decline of five quarter-over-quarter. Those funds owned 10.5% of Adtalem’s shares, valued at over $267 million. Cliff Asness‘ AQR Capital Management owned 1.10 million Adtalem shares on December 31, an increase of 167,211 shares over the fourth-quarter.

Grand Canyon Education Inc (NASDAQ:LOPE)

Grand Canyon Education Inc (NASDAQ:LOPE) is on a roll in 2018, gaining over 20% this year on the heels of massive gains in the second-half of 2017. Enrollments at the post-secondary education facility increased by 10.2% in 2017, which included a 10.5% increase for online enrollments, while revenue and income growth were even stronger at 19.1% and 42.3% respectively. The company’s free cash flow rose sharply in 2017, while operating margin also improved by 2.4 percentage points to 33.7%.

Grand Canyon Education Inc (NASDAQ:LOPE) was owned by 23 of the hedge funds that we track on December 31, up from 21 a quarter earlier. George Hall‘s Clinton Group was one of the funds to open a new position in the stock during the fourth-quarter, buying 61,482 shares worth $5.5 million at the time.

Chegg Inc (NYSE:CHGG)

Chegg Inc (NYSE:CHGG), a provider of textbooks and other learning materials and study aids, has transformed to a purely digital platform that should allow it to rapidly accelerate growth in the coming years, with an addressable market that could stretch to 30 million or more. A key component of Chegg’s future success will be its ability to raise its revenue per subscriber, as the company’s capex margin is currently a high 10% of sales. Chegg grew revenue by 17% to $73.5 million in the fourth-quarter.

Richard Driehaus‘ Driehaus Capital was one of 15 hedge funds tracked by Insider Monkey that owned shares of Chegg Inc (NYSE:CHGG) at the end of 2017. Those 15 funds owned 12% of the company’s shares heading into 2018, valued at $213 million.

Disclosure: None