Investment Guru Sees Corinthian Colleges at Risk
"Particularly risky is Corinthian Colleges Inc. of Santa Ana, California, which gets 90 percent of its revenue from the federal government, according to Barclays Capital," John Dorfman writes in his regular Bloomberg news service column. "In November, I explained some reasons why I would stay away from Corinthian Colleges shares, such as the fact that many of its students are struggling to pay back their loans."
The Weekly's Gustavo Arellano has reported repeatedly on the for-profit Corinthian Colleges being "diploma mills."
The negative forecast is contained in Thunderstorm Capital chairman Dorfman's commentary on the financial threats posed by elected officials wielding sharp budget axes.
"Listening to both Republicans and Democrats spout off these days, it sounds like austerity is the new patriotism," Dorfman begins his column. "Both parties vow to cut federal spending. Republicans, urged on by their Tea Party wing, say deficit reduction is their top priority.
"If and when rhetoric begets actions, stocks that depend on federal spending for a significant part of their revenue will be scrutinized by investors."
He sees defense stocks at risk unless developments in the Middle East prevent Congress from cutting too much from that sector. Should that happen, more budget cuts than previously anticipated will likely befall health-care spending, Dorfman believes.
Among the "vulnerable" health maintenance organizations he cites is Long Beach-based Molina Healthcare Inc., which gets a large slice of its revenue from Medicare.
Besides for-profit colleges, for-profit prisons could be in danger, according to Dorfman. That's stunning when you consider privatized prisons were the darlings of Republican politicians who are now being forced by their teabaggy brethren to cut-cut-cut, sacred cows be damned.