A professional investor tells us where he'd put his money. This week: Guillaume Uettwiller of the CPR Global Thematic Equities team picks his three favourite education stocks.
Education is a rapidly growing $5trn industry undergoing constant change. Population growth and the expansion of the middle class in emerging markets are producing a large contingent of new students, especially in countries such as China and India. Considerable investments will have to be made all over the world to meet burgeoning demand, with countries increasingly turning to private-sector provision of formal education to help compensate for the dearth of public funding. In addition, automation and digitalisation in the labour market are forcing a massive shift in the skills needed in the workplace, so lifelong training and career development are promising new areas. For long-term investors, the industry could provide diversification and attractive returns.
Education is a sector ripe for digital disruption
In this context, we like Chegg (NYSE: CHGG), a "one-stop shop" learning-platform provider of student services ranging from online tutoring and textbook rentals to scholarships. The company successfully shifted to a fully digital business model in 2017. It can now boost growth as it increases its penetration of the US market (today it has roughly 9% of the total available market) and bundles its services together in package deals.
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Online tutoring in China
Over the past five years, China's TAL Education (NYSE: TAL) has been expanding its learning-centre network rapidly, capitalising on its strong brand recognition to gain market share. Offline growth has so far been the key to overall expansion, but online education should become the major driver in the coming years. TAL Education's online services already have 2.4 million students, with enrolments increasing by 223% year-on-year last quarter. The online divisions could account for a fifth of sales by 2020.
Student housing has strong foundations
Unite Group (LSE: UTG)
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