Perdoceo: Downside Risk Emerges

Less than two months ago, I discussed Perdoceo (PRDO) as a potential value idea. Unfortunately, a new risk has arisen which is stopping me from continuing to enjoy the upward momentum.

The Democratic nominee for US President is now discussing tuition-free college as a campaign platform. I have zero interest in having a portfolio company compete with that, and so I recently sold all my shares of Perdoceo Educational Corporation.

When I invest in a stock, the most important thing for me is the downside risk. As such, I avoid companies with a lot of debt or where one customer is too important to the company's fortune. One other such risk is political; will the government put the business out of business?

In this case, a lot would have to go wrong for Perdoceo for that to happen. First, Biden would have to win. Then, he would actually have to make it a priority. He would probably also need help from other levels of government. So, the odds of this company being materially harmed may not be that high.

But, just as a highly-indebted company or one with a significant customer may be fine, over the long-term, I will pay the price eventually if I don't look after the downside.

The stock is up over 60% over the last two months. Sometimes, if you buy cheap or get lucky with timing, even when (potentially) bad things happen, things can work out!

Disclosure: No position is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.