Around my house, there are two big events coming up on the calendar for the month of December. First, of course, is Christmas. I hope you got your shopping done because if you’re still ordering gifts now, you may not get them by the holidays.
But the other big event is the Army/Navy college football game tomorrow, Dec. 11. I grew up in Annapolis, Maryland, and I spent a lot of time going to Navy football games and around the Naval Academy.
It was a very cool experience, and it’s always the best football game of the year regardless of who you are rooting for. But anyway, go Navy!
Now, one of the best ways to get rich in the markets is to find one of those unstoppable, unbeatable, runaway trends… a revolution that’s going to change portions of society and the economy. Hang on to one of the leading stocks in that area and just ride it as far as it will go.
These special situation stocks can literally make you a fortune. It’s no secret that education in the United States is changing. It has to change. In many ways, the system has been broken for some time now, and we’re not turning out the same quality education product that we did decades ago.
But education is going to change. It’s going to be more technologically driven than ever before. During the pandemic, we saw schools scrambling to get 100% online. It was difficult, but it was spotty success, and the schools did learn a lot about online education.
But where the massive change in the education system occurred was at the college and university level, where you finally had parents and students alike scratching their heads and asking why they are paying $60,000 a year to stay home and get educated online.
They started to realize that they could just consider that as a whole new option, and we’re seeing that occur more and more. The runaway cost of college education is one of the saddest stories in the American economy over the last 20 years. It’s ridiculous.
Now, online technology is going to come along and revamp the entire system to offer a quality education to students for much lower prices. Remember, Stanford already offers their entire course catalog online. You can find free college courses all over the internet these days. Organizing all that and putting together a university degree program, I think, is the next step.
And the company leading the way in online education is Chegg, Inc. (CHGG). This company did not start out to be a revolutionary company.
It was two Iowa State students who realized they and their friends were paying way too much for textbooks, so they developed a used textbook rental company that has grown across the US and has done very well.
They eventually began to put those textbooks online for electronic reading apps where you can manipulate, move around and highlight the data without destroying the value of the books.
And even though they still offer new and used textbooks, they’ve started to expand into the digital learning space that allows students to search through and find what they need. They then started offering digital assistance to students so that they had access to thousands of experts in various courses and get an answer to their questions in about 30 minutes.
Something ridiculous like 94% of students say that when they use Chegg’s products to perfect their study process, their grades improve. Chegg is also offering other systems like practice tests and online tutoring at very reasonable costs that are giving students the tools they need to get great grades that help them ensure a great future.
They were founded just to help save money on books but have become a revolutionary company with a very visionary management team. But last quarter, Wall Street didn’t like the earnings, and I don’t know why.
The company showed 12% revenue growth year over year, with 20% growth in services and increases in cash flow. They’ve added writing and math programs that have also been well received and are driving growth in the services segment.
I thought it was a fantastic quarter, and even the most conservative analysts on Wall Street think that over the next five years, earnings will continue to grow by at least 30% a year. In spite of that, the stock has been down dramatically thanks to the very short-term, sensitive, Wall Street approach to selling something they don’t like or don’t understand.
I think if you’re buying at current levels, the worst-case scenario over the next three to five years is that you triple your money. This is a fast-growing company that knows what it’s doing, knows the college market and knows how to serve it. They’re putting the tools in place to make students more successful, and they’re going to be a massive part of the remaking of education in the US.
The company is very confident in their future, as they just announced a $300 million stock buyback. They also just bought another company called Busuu, which is a company that offers language training for individual and corporate customers, so they’re adding new businesses to the product line. That’s something they’ve been very successful at since they first started in 1994.
I’m really excited about this company, as it’s one of the best educational services and technology companies on the market today. I think they’re just going to get better, and this special situation could turn into one of the better momentum stocks in your portfolio.
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