Steve
Kerby
OMDE 622, spring 2005
Assignment #1
eLearning
Stocks:
Brief Report on an Investment Experiment
On February 17, I "invested" $10,000 in five eLearning stocks--$2,000 each in:
- Educate
- Strayer
- Macromedia
- Blackboard
- eCollege
I tracked their value weekly for 11 weeks. On Feb. 17, the stocks were worth $10,000.37. On April 29, they were worth $10,304.35. The stocks as a group experienced a 3.04% growth in 11 weeks. This was due to the increase of Blackboard and Macromedia.
I compared these stocks with the performance of NASDAQ and all the eLearning stocks listed on the Brandon Hall site.
During the 11 weeks:
- NASDAQ was down 7% (2061.34 to 1921.65)
- Brandon Hall selection was down 7% (36,000 to 33252.47)
- My Five Selections were up 3% (10,000 to 10,304.35)
- compared to both NASDAQ and the BrandonHall group: 10%
PREDICTIONS
I would not buy most of the eLearning stocks listed on the Brandon Hall site. Most of those trying to feed off the value chain by developing courseware and infrastructures look risky. Those that own the value chain (the schools) look the strongest.
Macromedia looks good for reasons having little to do with eLearning. Its value is in its development tools for new (mostly entertainment/news) media such as can be developed and digitally distributed via the internet, wireless, cell phones, etc. I would continue to keep my money in Adobe/Macromedia.
If an online learning platform can be a gorilla, Blackboard continues to look like one. Despite the sophisticated conversion tools made available by competitors, switching costs can be high financially if a school has invested heavily in data integration with its Student Information System; and switching costs can be high culturally if a school has invested heavily in faculty/staff training on the platform. In other words, most schools using Blackboard are motivated to continue using Blackboard despite high licensing costs. Even so, it is difficult to see how Blackboard can withstand the eventual threat of OpenSource competitors. I would invest in Blackboard, but would sell when the trend line starts to go down a full quarter or two.
I am persuaded that most of the expected job growth in the US will be from jobs that require some college. And I doubt that the traditional not-for-profit institutions will be able to meet that demand, since most are actually trimming their budgets and cutting back due to State budget cuts. Apollo, Laureate, Corinthian, and Career Education are poised to take advantage of that, especially as they move increasingly to online offerings. For the investor, Career Education and Corinthian look especially good, since their stocks are fairly low right now due to the recent investigations and lawsuits against them. If I were investing real money for the next 12 months, I would invest in Blackboard, Macromedia, Career Education, Corinthian, and Laureate. It seems likely that each of these companies are likely have significantly higher stock values in May 2006.
I would hope to have the opportunity to sell Corinthian (currently $14.16) at around $25 dollars a share, Career Education (currently $31.51) at around $50 a share. Regardless of price, I would sell Blackboard after a clear downward trend. I would probably keep both Laureate and Macromedia/Adobe for the long term.
