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Yesterday, after the market close, Barron’s Online had a damning article (Do Apollo Group Investors Need an Education?)on APOL which pretty much reinforces what I and the articles I have linked to have said. Excerpts:

The federal funding that backs Apollo’s student loans has been called into question because of high dropout rates and default rates among its candidates for associate degrees. And investor attention has recently shifted to newcomer Grand Canyon Education (LOPE), which went public back in November.

..

Certainly Apollo Group Executive Chairman John Sperling seems to believe the time is ripe to realize some gains. As Barrons.com reported on Jan. 26, Sperling and his son sold $71 million in stock from Jan. 15 to Jan. 22, on top of a previously planned $89 million stock sale. Sperling and son continue to own a combined 18% of the company’s shares. (See Inside Scoop, “Education Execs Raise Degree of Selling,” Jan. 26, 2009.) Mohan’s note: I didn’t read this article, but I am heartened to note that Barron’s also came-up with a variation of my opinion on these “degree sellers.”

…

Nevertheless, there are enough very simple reasons to stay away from for-profit education stocks in general, and Apollo in particular, after their strong run.

For one thing, the Obama administration may not be as favorable to for-profit educational outfits as the Bush White House was. The previous executive branch was widely regarded as friendly to efforts at private education, and a former Apollo Group lobbyist, Sally Stroup, was assistant secretary for postsecondary education from 2002 to 2006.

President Obama, by contrast, has demonstrated more of an interest in making federal aid available for community college education and on improving early education.

..

[The article has been illegally copied on Yahoo Boards. Part 1; and Part 2]

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Original post

On this board or in my replies to Intraday Trading blog I have occasionally mentioned about one last standing bubble sector in stocks: degree sellers, namely Devry, Strayer and Apollo Group. OK, you can throw in ITT Technical Institute here also, but they are in the business of vocational training, not selling degrees.

(FYI: being an educator myself, I cannot bring myself to call them education companies. I think they are in the business of selling worthless piece of paper, and call it a degree, to some of the most vulnerable and the gullible).

Since the shakeout in October, this sector has been performing strong. STRA, APOL are close to 52 week highs. DV just cracked. I have read reports that cash-flow at DV is weak and APOL is facing a major law suit which accused them of ‘fraud’ (a la EVCI Career Colleges , which went from over 100 in 2001 to 0 last year.)

I reserve judgment on the three “college”  stocks. But, I think that the time to short these three may be NOW. Well, the insiders think so – they are literally dumping their shares of these three companies.

Why duplicate the effort in two most compelling and credible analytical articles I read on this subject?

1. From Seeking Alpha: Even with Aggressive Valuation, For-Profit Education Stocks Seem Overvalued
2. From Citron Research: Citron Releases the Document that The Apollo Group (NASDAQ:APOL) Does Not Want You or the US Government to See.
3. Again from Citron Research: Citron Comments on Apollo Part 2 – Revenge of the Analysts

Charts of APOL, STRA, ESI and DV look either toppy or broken. In addition to insider selling, aggressive call selling and put buying has picked up on APOL, DV and STRA. In the past I made good money on APOL puts. I don’t have any position on them now. I have DV in my cross-hairs for buying puts tomorrow.

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The VWAP is calculated by dividing the dollar volume of a stock by the share volume over a given period of time. Simply put, the VWAP is the average price that each share was executed over the period of time being studied.

I use the ThinkOrSwim charting software and they do not have a study for VWAP, so I made one myself. Create a new user defined study and enter the following code:

plot Data = TotalSum(Volume * Close) / TotalSum(Volume);

I use VWAP charted on a 1-day chart with a 1-minute interval. To use properly in TOS charts, make sure you only include price action from Today. To set the correct time frame, click Style: Intraday: Today: 1-minute

The VWAP is considered to be a fair benchmark for comparison of the institutional trade desks ability to execute trades on behalf of the customer. If the brokerage purchases were made at a price less than VWAP then they did a good job for the customer. If the price paid was greater than the VWAP they may lose that customer for future transactional business. The daily VWAP is a number which changes as orders are transacted at varying prices throughout the day.

Because VWAP is such an important piece of data to the largest market participants, it is something that every market participant must be familiar with in order to stay on the correct side of the market.