Long time readers will know that Grand Canyon Education (LOPE) has been a core holding of my $100M fund for the last five years. Grand Canyon operates a beautiful 300-acre college campus ten miles north of downtown Phoenix. The school will enroll 17,000 ‘ground students’ next fall. It also has over 60,000 online students, most of whom are adult learners (over 21 years old) seeking to restart their undergraduate studies or pursuing certificates and master’s degrees in their chosen professions.
I first wrote about Grand Canyon nearly three years ago, just before I gave a presentation on it at the 2014 Ira Sohn Conference in San Francisco. LOPE was trading for around $43 a share at the time. I continued to write about Grand Canyon over the next two years, praising its impressive growth, smart management, and the quality education it provided. And yet, despite doubling its EPS and beating analysts’ estimates over a dozen quarters in a row, the stock barely budged. At the time of my last piece on the company, in April of 2016, LOPE was trading for … around $43 a share.
The main reason for LOPE’s persistently flat performance was that it was a very good stock in a very lousy neighborhood. The negative sentiment around the for-profit education industry—which is well-deserved for nearly every company in it, with the exception of Grand Canyon—kept investors from buying into what was one of the most impressive businesses I have ever come across in my three decades of money management.
It took until last fall for the markets to finally recognize Grand Canyon’s excellence. LOPE hit $80 last week, up roughly 100 percent over the last year and nearly 300 percent since my fund first entered the position. Nonetheless, I believe Grand Canyon remains one the best growth companies in America today.
I have lived in Marin County, possibly America’s preeminent left wing enclave, for over two decades. Marin residents are old (and getting older), white, and vote heavily Democratic. They overwhelmingly embrace abortion rights, drug rights, and gay rights. Church attendance is extremely low; mind-altering pharmaceutical drug use and therapist attendance is extremely high. The cult of self is Marin’s dominant religion. And outside of Greenwich, Connecticut there are probably more money managers, per capita, in Marin than anywhere else in America. Marin’s attitudes are not unique. The investment community and the media/cultural elites on both coasts share a suspicion (or dislike?) of religious, socially conservative Americans. That might explain why companies that cater to the values of Red State residents are poorly understood, poorly followed, and often undervalued by the stock market. Continue reading
[note: a slightly different version of this post originally appeared on my Yahoo! Finance contributor page]
I’m a sports fan, but I don’t plan on watching the Final Four this weekend. Sure, the players are inspiring and the games are usually exciting and dramatic. I just can’t bring myself to tune in to a bunch of unpaid employees generating billions for one of the most corrupt rackets in the world, the NCAA. But–as regular readers of this blog know all too well by now–my distaste for so-called amateur athletics pales next to the utter disgust I feel for our broader system of higher education.
Talk about an industry desperately in need of disruption.
Wednesday was a big day for my fund. Earnings season is upon us and two of our largest longs reported quarterly results. I expected both companies to smash analysts’ estimates. Sure enough, that’s exactly what happened. You’d think I’d be celebrating big gains in both stocks, but unfortunately, you’d only be half right.
Too bad this isn’t baseball. Batting .500 will get you into the Hall of Fame in that sport. In my game, though, it generally won’t get you too far.
I glanced at a recent issue of the Stanford alumni magazine the other day. It featured an interview with former school president Gerhard Casper and an excerpt from his book on “addressing the challenges of higher education.” The piece was underwhelming, to put it mildly. There was the usual pabulum about school rankings, measuring outcomes, and fostering diversity. But there wasn’t a single word about the biggest problem facing higher education today:
It costs too damn much!
Our nation’s universities, public and private, have crushed an entire generation with debt. All told, young adults owe more than a trillion dollars in student loans. That’s a huge drag on our economic growth. And where is all that borrowed money going (besides the Wall Street banks that underwrite many of the loans)? It’s propping up one of the most backwards and wasteful industries in the world: academia.