A couple of weeks ago we added a position of Devry (DV) after they posted excellent earnings and discussed a rosy outlook. That was on the heels of the announcement that Apollo (APOL) was being investigated over some of their accounting practices related to student recruitment.
While we do like Devry as well as some of the other names in the sector such as Corinthian (COCO) and ITT Education (ESI), there was a great deal of weakness that these names showed after the Apollo news. We felt that there were a few possible scenarios that could play out.
- Devry would continue to perform as earnings and outlook were good
- Devry and the rest of the industry could become ensnared in the same mess as APOL
- There would be a separation of the “good” and “bad” players within the industry
The most likely was the first, but we would have to see if the stock began to change trend along with the industry. That could tip us off that there was something more underlying the moves.
We sold the position very quickly for a small profit and also moved out of COCO for a small loss at the same time. The point is that while this could be a simple over-reaction, the shares are selling off at an accelerated pace. If nothing actually occurs with DV or others, we would look at these position(s) again as there may be potential.
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Disclosure: Horowitz & Company clients may hold positions of securities mentioned as of the date published.
