COCO, REVU, SCHS: Time Ripe to Book Profits in Education Stocks?

Education stocks such as Corinthian Colleges Inc (NASDAQ: COCO), The Princeton Review Inc (NASDAQ: REVU), and School Specialty Inc (NASDAQ: SCHS) have been net gainers in the last month or so. However, as with every rally, this up move has to stop somewhere and the trend reversal may happen sooner than later.  

Corinthian Colleges Inc (NASDAQ: COCO) has moved up nearly 37 per cent in the last 30 days. The stock has been moving up with the broader market but constant fund based buying is also taking place in parallel. In a latest filing, Wells Fargo & Co stated that it holds a passive stake of 8.32 million or 9.8% of outstanding shares in COCO, an increase of 0.31 million shares from the 8.01 million it held at the end of Q3. Now this is a big token of confidence in the company. Corinthian Colleges is one of the largest post-secondary education companies in the United States operating over 120 colleges in the states and Canada. However, an RSI value of 72 tells that the stock may be overbought at current levels of $2.94. Yesterdays’ drop of 6 per cent may be the first crack in the wall. It may be a matter of few days that the 200 day moving average catches up with the stock and starts range bound movements.

Similarly, The Princeton Review Inc (NASDAQ: REVU) has advanced nearly 31 per cent or so in the last month. However, unlike COCO, REVU has a spiked chart pattern. The stock had a sharp increase last week on higher volumes but it soon fizzled out. Yesterday also the stock tried to break out with a 6 per cent jump, but the movement is too erratic and it does not look like convincing. All these price movements are based on unconfirmed reports of the educational publisher being bailed out of its heavy debt, but there has been no announcement so far in this regard. Investors may be burning their fingers by buying these rumors.  

School Specialty Inc (NASDAQ: SCHS) is a solution provider to schools. Its instructional products are used in a range of classes from pre-kindergarten through twelfth grade. Although it has not surged a lot in the last month, the stock is likely to face resistance at $3.1 – its 50 day moving average. Continuing with the previous quarter, latest quarter earnings are likely to be above expectations which could be the catalyst in the stock’s price movement.