As the kids trundle off to school, let's see if we can't get an education in education stocks.
Higher education has become big business, and
tag line says it all: the company is "the leading brand in higher education." Through its subsidiaries -- the University of Phoenix (which includes the University of Phoenix Online), the Institute for Professional Development, the College for Financial Planning and Western International University -- Apollo has established itself as the leading provider of higher education for working adults.
Apollo Group has enjoyed sustained growth in both student enrollment and financial growth, more than doubling total enrollments and revenue between 2001 and 2005. Their programs, designed around working adults, have literally changed the business model and course structure of higher education.
In addition, their schools are accredited, which allows students easy access to federally funded student loans and grants, creating a more stable income stream for Apollo and allowing more students to enroll.
Apollo is the largest for-profit educational company, with about 300,000 students. The company operates 259 campuses and learning centers in 39 states and various international locations. Programs range from associate degrees to doctorate degrees, with coursework in business, education, health care, technology and social and behavioral sciences.
I give Apollo an "A" in financial health, with a textbook balance sheet, a forward
price-to-earnings ratio ratio of 20.48 and a staggering 52.72% ROE. It has big revenue, and best of all, has no debt and almost $600 million in cash on the balance sheet. No pop quiz is necessary to take advantage of this smart deep-in-the-money (DITM) call recommendation.
To make the grade and score a win, I will go all the way out to February and place a limit order to buy 10 February 45s (OAQBI) at $12.90 or better. Shares closed at $57.11 on Thursday.
Fielding Reader Email
Now it's your turn. I use every Friday as the day for all my loyal readers who give me the inspiration to dig in and keep pushing to find you winners day in and day out.
I'm a big Phillies and Dykstra fanfrom when I grew up in South Jersey. Iloved those Dykstra/Kruk/Daulton teamsand can't think of a funner time to beplaying baseball. Fairly new trader and trying to get alayman's description on how these callplays work. Is it something I can dothrough a broker like Ameritrade? Does this mean you pay $11.50now for the right to buy these sharesat $55 any time in March?Any online broker or tracking service youprefer or recommend to use for trades?
You can trade options online as you suggest, and you have the option concept mostly correct.
Let me explain: A call option gives you the right, not the obligation, to purchase the underlying security at the strike price until the option expires. As you put it in your example, you pay $11.50 now for the right to buy the shares at $55. But here is where you've been led astray, because you have the right to exercise the option and purchase the stock anytime prior to the third Friday in March.
However, when following my DITM calls strategy, exercising the option is not the goal. Having the option increase in value and selling it for a profit is the goal, the purpose and the name of the game.
Lenny:Automatic Data Processing's (ADP) - Get Report economics and balance sheetstrength are solid. However, callingfor a new high during a slowdown/periodof high-profile layoffs smells like aslow premium burn to me.I prefer a "combo" strategy (buy an out-of-the-moneycall, sell an OTM put to finance thecall purchase), although I haven't had achance to research the most compellingoption values.
An important component of my DITM calls strategy is that the stocks I choose have very strong fundamentals. With ADP, it wasn't necessary for it to reach a new high -- we are not trying for home runs, as a small increase in the stock price will provide us with another base hit, and we walk away with a $1,000 gain. With ADP, this happened in only a day.
If you like your strategy and it works for you, my suggestion would be use it to your advantage, but make sure you get in there and play. Is it possible that while you were contemplating the most compelling option values, followers of my column were booking a win and looking for the next DITM calls opportunity?
I seem to have a problem. By the timeI find your play for a stock option, theoption has moved past your price. Forsome reason I can't seem to find yourpick until the end of the day, when itis too late. I see the time on it isearly in the morning, but I don't get ituntil night or the next day. How can Ifind it when it comes out?
As soon as my column posts in the morning, it is available for reader access. However, due to the number of quality columnists, TheStreet.com will rotate how long a direct link is listed on the home page. To find my column when this link has rotated off the page, try selecting my name from the Featured Commentators drop-down list that is always available from the home page (or
and bookmark this page). From there you will find the complete archive of all my columns, with the most recent at the top.
At the time of publication, Dykstra had no positions in stocks mentioned.
Nicknamed 'Nails' for his tough style of play, Lenny is a former Major League Baseball player for the 1986 World Champions, New York Mets and the 1993 National League Champions, Philadelphia Phillies. A three time All-Star as a ballplayer, Lenny now serves as president for several privately held businesses in Southern California. He is the founder of The Players Club; it has been his desire to give back to the sport that gave him early successes in life by teaching athletes how to invest and protect their incomes. He currently manages his own portfolio and writes an investment strategy column for TheStreet.com, and is featured regularly on CNBC and other cable news shows. Lenny was selected as OverTime Magazine's 2006-2007 "Entrepreneur of the Year."