Educated investments

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Stocks that are in the education sector, which includes for-profit colleges, online degree programs, primary-school online learning tools and training companies, posted double-digit gains as of press time in 2013 and still have room to grow in 2014, according to Trace Urdan of Wells Fargo Securities.

Urdan and Timo Connor, who is a research analyst at William Blair, say pent-up demand, particularly among vocational schools, should fuel a spike in enrollment in 2014. Any enrollment growth for two quarters in a row is enough to be a buy signal, Urdan adds.

Both analysts warn that these aren’t “set it and forget it” stocks. The 2014 election might affect the sector’s performance, experts say, because Democratic control of Congress could reduce enrollment or profits, while Republican control would be perceived as positive.

We’ve reported that for-profit online universities’ strong-arm marketing tactics seem to stress generating revenue more than providing a valuable education. (See “The Truth About Online Universities,” at ConsumersDigest.com.) From an investment perspective, however, Urdan and Connor both like Grand Canyon Education (Nasdaq: LOPE; Price: $45.83), because it has shown consistent earnings growth. The experts also like Capella Education (Nasdaq: CPLA; Price: $66.17), which Urdan says has a large cash cushion to help it to withstand dips, develop the business or fund acquisitions. Connor adds that both schools have “high graduate incomes and relatively low levels of graduate debt.”