Blum Capital Partners Reduce Position in Career Education

Richard Blum's hedge fund firm Blum Capital Partners has filed an amended 13D and various Form 4's with the SEC over the past few days regarding their stake in Career Education Corp (CECO).  According to the filings, Blum has disclosed a 16.1% ownership stake in CECO with 10,803,834 shares.

This marks a decrease of around 19% in their position size since the end of 2012 when they owned over 13.3 million shares.  The latest 13D amendment was made due to portfolio activity on April 12th.

Looking at Blum's Form 4's, we see that they've been selling from April 4th through the 13th at prices ranging from $2.1 to $2.18.

It's also worth mentioning that Blum owns another large stake in the for-profit education space: ITT Educational (ESI).  As of the end of 2012, this was an even larger position for them, though they were out selling some shares in the fourth quarter according to their last 13F filed with the SEC.

The for-profit education sector has been under scrutiny from some time by regulators and has been shorted by numerous hedge funds as student loan debt has grown rapidly over the past few years.  Back in 2010, Steve Eisman laid out a bearish view on the sector in his presentation: subprime goes to college.

Per Google Finance, "Career Education Corporation ((CEC) through colleges, schools and universities that are part of the CEC family, offers education to a diverse student population of approximately 100,000 students in a variety of career-oriented disciplines through online, on-ground and hybrid learning program offerings. The Company has approximately 90 campuses that serve these students are located throughout the United States and in France, the United Kingdom and Monaco. It offers doctoral, master’s, bachelor’s and associate degrees, diploma and certificate programs. It institutions include, among others, American InterContinental University (AIU); Brooks Institute; Colorado Technical University (CTU); Harrington College of Design; INSEEC Group (INSEEC) Schools; International University of Monaco (IUM); International Academy of Design & Technology (IADT); Le Cordon Bleu North America (LCB), and Sanford-Brown Institutes and Colleges."

What We're Reading ~ Analytical Links 3/6/13

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The short case on Boulder Brands (BDBD) [Prescience Point]

Why are most people terrible investors? [Phil Pearlman]

12 cognitive biases that endanger investors [Minyanville]

Interview with Paul Lountzis on investing & scuttlebutt research [Simoleon Sense]

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Study reveals most at-risk retailers for Amazon showrooming [Placed]

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Want to short the student loan bubble? Now you can [Zerohedge]

Getting schooled by Career Education (CECO) [Barel Karsan]

Vornado selling chunk of J.C. Penney (JCP) stock [WSJ]

America Movil (AMX): time to buy in bulk? [FT]

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Google (GOOG) is building a same-day Amazon Prime competitor [Techcrunch]

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Why getting an MBA isn't worth it [WSJ]

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.