Apocalypse-Monger Robert Rodriguez Loads Up on Devry: For-Profit Ed Beaten Up Enough?
Investors have been ditching shares of for-profit colleges for most of a year now while enrollments decline and even Doonesbury trashes their reputations. So it’s particularly interesting that Robert L. Rodriguez, who makes millions investing in businesses that others leave for dead, suddenly loves DeVry Inc. (DV), poster child for the troubled sector.
DeVry and the rest of the lot have been in decline since short sellers focused attention on their very low graduation rates and very high student debt loads.
For-profit college students tend to pay with government loans or grants; many, many of them default; and the government has, sort of, limited access to such funds for this sort of education. The publicity has been bad for the industry all around, leading potential students to question the investment and Garry Trudeau to depict their leadership on the cartoon pages as money-grabbing sleezebags preying on clueless young people.
Rodriguez, managing partner and CEO of FPA Capital Fund, held a handful of DeVry shares at the end of last year. But last quarter, he grabbed a bunch. The DeVry portion of the portfolio went from about 0.20% to 2.65%, according to the fund-tracking site dataroma.
Rodriguez is best known for predicting disasters, like the recent credit crunch and housing bust. He has little faith in the current economic recovery, and in fact wouldn’t be surprised if the U.S. lands itself in a European style debt crisis. His fund is currently heavy on oil stocks, with Rowan Cos. (RDC) and Ensco PLC (ESV) comprising about 20% of the portfolio now.
So what does he see in this ugly school situation? Perhaps it’s simply a straightforward value play on an industry he doesn’t expect will go away. DeVry shares, despite the company’s problems, pay a 1.5% dividend yield. And they sell for a very small PE ratio, which is a characteristic Rodriguez tends to value.
Oh, and another thing about Rodriguez: he’s a pretty patient investor. He’s not afraid to hold shares, for a long, long time.