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There's an old saying that the best investment a person can make is education. Shareholders of Strayer Education (STRA), a recent addition to my Emerging Growth portfolio, would certainly agree.

Strayer is a for-profit university offering associates, bachelor's and master's degrees in a wide range of subjects. They currently have over 37,000 students at 55 campuses across the United States. These students are primarily working adults who've decided to return to school to further their education and increase their earnings potential. As the uncertain economy is making many people head back to school to learn new skills, Strayer is poised to profit.

This stock has the type of powerful fundamentals that make a stock an Emerging Growth stock. Revenues are rising rapidly. Earnings are growing year over and year. The company is beating analyst estimates, analysts in turn are scrambling to raise them even higher. The company is using its growing free cash flow to buy back stock, pay dividends and expand its business. These powerful fundamentals  are creating tremendous institutional buying pressure, which is just what I like to see as a growth investor.

The best news is, Strayer's unique business plan sets it apart from its competition–and places it at the head of its class! The company uses a funding model for its student base, thus avoiding the credit problems and loan charge-offs many other private universities have dealt with this past year. The company estimates that 65% of its students have federally guaranteed Title IV loans and another 25% are paid directly by employers under Strayer's growing network of corporate alliances. Only about 3% of its students have private loans and less than 1% of them have the type of low credit scores that would fall into the subprime borrower category. As a result, the company has the lowest bad loan percentage of any other private education company in the industry!

And the company continues to grow. In mature markets Strayer grew by over 5% in the fourth quarter. They plan to open at least two more education centers in the current quarter, and its web-based curriculum, known as its Global Online division, grew over 32% last year. It's expected to accelerate as more adults take advantage of the convenience of online education to gain their degrees.

Bottom Line: Strayer is a unique spot in the economy. It serves a definite need that is expected to grow, not decline. Its strong network of corporate alliances and concentration on  federally insured loans, rather than private loans, allows it to sidestep many of the credit problems associated with private education companies. In addition, Strayer's tremendous returns on capital gives the company a solid foothold to continue to grow.
To find out my specific buying guidelines on Strayer and for the complete list of all of my Emerging Growth winners, sign up risk-free for Emerging Growth for 90 days–if you're not satisfied, you receive a 100% refund.  Try it today!

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