Richard Blum's Firm Buys More ITT Educational Services (ESI) ~ market folly

Tuesday, October 19, 2010

Richard Blum's Firm Buys More ITT Educational Services (ESI)

Richard Blum's hedge fund Blum Capital has filed an amended 13D with the SEC regarding shares of ITT Educational Services (ESI). Due to portfolio activity on October 14th, Blum Capital has disclosed a 12.1% ownership stake in ESI with 4,076,705 shares.

The firm also filed a Form 4 disclosing recent trades in the stock as they purchased 200,000 shares of ESI at $54.73 on October 14th, amongst other smaller transactions. Blum Capital has been buying ESI in small spurts through September and October and originally filed a 13D on ITT Educational Services back in March of 2008.

This isn't the only education-focused stock they own either. Blum also has a sizable position in Career Education Corporation (CECO). The for-profit education sector has been a battleground of hedge fund activity as well as regulatory concerns and changes. Richard Blum's firm is obviously on the long side of the trade, as are Lee Ainslie's hedge fund Maverick Capital and Chase Coleman's Tiger Global Management (with shares of Apollo Group ~ APOL. Or at least they were as of the end of Q2. Given the shake-up in the industry, it's hard to know for sure if they still own it).

There are other hedgies on the short side of the trade. Steve Eisman of FrontPoint Partners has seemingly led the charge against for-profit education with his presentation, "Subprime Goes to College." Whitney Tilson's T2 Partners has been short various names in this sector and recently commented that they haven't covered their position yet despite the sharp declines as of late. We've also posted Footnoted Pro's research on the for-profit sector which they highlighted back in May before many of the stocks dropped 40%+.

With big names on both sides of the trade, we'll have to see how this one shapes up as regulatory change seems to be the determining factor. One thing's clear though, Blum Capital is betting on ESI and CECO.

Richard Blum founded San Francisco based Blum Capital in 1975. The firm focuses on controlling investments in public and private domains. They typically focus on small and mid-cap names and seek to extract shareholder value. He received both his BA and MBA from the University of California at Berkeley. This is the first time we've detailed portfolio activity from this firm and we'll track them from here on out.

Taken from Google Finance, ITT Educational is "a provider of postsecondary degree programs in the United States. The Company offered master, bachelor and associate degree programs to approximately 80,000 students. It has 125 locations (including 121 campuses and four learning sites) in 38 states."

For more of our daily coverage of SEC filings, scroll through our breakdown of hedge fund portfolio activity.

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