7 Education Stocks That Could Benefit from a Wealth Tax

education stocks - 7 Education Stocks That Could Benefit from a Wealth Tax

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Both Republicans and even Democrats are discovering that President Joe Biden isn’t the apocalyptic threat that many right-leaning conspiracy theories warned about. For instance, the Biden administration has been taking its sweet little time to overhaul his predecessor’s controversial immigration policies. No, the real threat to (and opportunity for some) stocks to buy is Senator Elizabeth Warren. But what, you may ask, does that have to do with education stocks?

Well, earlier for InvestorPlace, I discussed how Warren’s proposed wealth tax could impact your portfolio. But prior to the pandemic, she pushed for an $800 billion education plan during her run for the presidency, with the rich footing the bill. Essentially, you can call it an education tax. Whatever change you want done, just tax the rich.

If only it were that simple. For one thing, the Senator herself is worth several million dollars so she’s not exactly Robin Hood – I’m talking about the myth not the app. And despite her best efforts, Warren and her progressive colleagues have failed to convince President Biden of enacting bold, paradigm-shifting actions. Again, he’s a moderate so you want to be careful how you approach certain stocks to buy.

Nevertheless, Sen. Warren is a political pit bull – don’t let that quiet demeanor fool you. Further, she doesn’t look like she’s going to let go of her de facto education tax and she’s incentivized to keep fighting. She must know that Democrats have a slim majority in Congress. Moreover, many voters are angry with liberal leadership, potentially upsetting the balance of power. Therefore, you should at least entertain the idea of stocks to buy due to an education tax.

Now, I want to be clear – I’m not rooting for Elizabeth Warren. Plus, I have some questions about any education tax. To me, it seems like a Ponzi scheme to benefit demographic fortuitousness and not extend that to everyone who took on student loan debt. Anyways, if such aggressive proposals go through, here would be some stocks to buy.

  • Chegg (NYSE:CHGG)
  • Grand Canyon University (NASDAQ:LOPE)
  • TPG Pace Tech Opportunities (NYSE:PACE)
  • Universal Technical Institute (NYSE:UTI)
  • Adtalem Global Education (NYSE:ATGE)
  • Bright Horizons Family Solutions (NYSE:BFAM)
  • 2U Inc (NASDAQ:TWOU)

A quick note before we dive in: banking on stocks to buy based on forecasted political trends is tricky. After all, I’m sure the Democrats were hoping to ram through legislation after legislation with their “blue wave.” That’s not quite happening (at least not yet) with moderate Biden. Therefore, take these ideas with a grain of salt.

Chegg (CHGG)

Chegg (CHGG) logo on the company's web page magnified by a magnifying glass

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Chegg — a company that offers home-learning aids and tutoring online — might seem like a strange company to lead off stocks to buy should an Elizabeth Warren-endorsed education tax go through. That’s because company CEO Dan Rosensweig sounded the alarm about the impact the novel coronavirus pandemic has had on higher education. According to a Fortune report, Rosensweig believes that 25% of colleges could go out of business.

On the surface, that’s not helpful for CHGG stock. Heck, even deep beneath the surface, that wouldn’t be great for education-related stocks to buy. However, to truly give yourself the best chance of success in the white-collar world, you do need to have a college education. Sure, there are exceptions to the rule, such as the Bill Gates and Steve Jobs of the world. But again, they’re exceptions, not the rule.

Yes, some academic institutions will inevitably fail. But the major players will keep going strong – and they’ll probably continue to attract students from all over the world. And if an education overhaul occurred, that might benefit CHGG stock.

Grand Canyon University (LOPE)

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Under Warren’s original education tax proposal, the measure would “pay for universal child care as well as a higher-education plan, which includes student-debt cancellation and tuition-free public college.” Here’s the deal with the next name on this list of stocks to buy on an education rethink: Grand Canyon University is a private institution. So, why include it at all?

If I may be honest, it’s not like the market is chock full of education stocks to buy so I’ve got to put something on here – sorry for breaking the fourth wall. But seriously, I would imagine that any proposal to reset our educational system would involve some aid toward students who choose to go the private route. Indeed, the push for free college might incentivize students to consider something like Grand Canyon, which would benefit LOPE stock.

It really comes down to simple supply and demand. Whenever you have too much of something, the quality tends to decline. Can you imagine free college? There will be tons of people flooding academia, something like Accepted’s South Harmon Institute of Technology at scale. I know it’s cynical but it could honest-to-goodness boost LOPE stock.

TPG Pace Tech Opportunities (PACE)

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As you might guess from its funky name, TPG Pace Tech Opportunities is a special purpose acquisition company. Though SPACs are the hottest thing on Wall Street right now, investors ought to do their homework with these blank-check companies – and PACE stock is no different. That said, I do find its announced reverse merger with education platform Nerdy quite intriguing, at least with this particular theme of stocks to buy.

Nerdy owns a tutoring business called Varsity Tutors, which brings the gig economy and educational technologies (or edtech) together. With waves of students interested in white-collar careers as opposed to blue-collar manual work, the student-to-instructor ratio will continue to get out of whack. As with the economics 101 point above, too many students and not enough professors will lead to a degrading of overall quality and results.

Potentially, Nerdy can help mitigate this perhaps inevitable downward trend. The concept is brilliant, bringing free-market solutions with a healthy dose of technology. I’m not necessarily the biggest fan of SPACs, but PACE stock is something to watch.

Universal Technical Institute (UTI)

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Admittedly, it’s unclear how Warren’s education tax will affect technical and trade schools – you know, places where they teach you how to actually do something? But the beauty of Universal Technical Institute is that a rethink on technical or blue-collar work could happen, which would be very good for UTI stock.

Well before the pandemic, many industries suffered badly not because of a dearth of opportunities, but rather qualified and more importantly willing individuals to work them. Simply put, people today – especially the younger crowd – are not interested in blue-collar jobs. That’s a shame because you can make a ton of money by simply educating yourself on skill sets that are high in demand and low in supply. And that’s where UTI stock is incredibly viable.

Sure, working outdoors and actually working is not everyone’s cup of tea. But unless you’re the best at a particular white-collar field, it’s tough to make it. I’m almost certain that this lesson will get around, making Universal Technical Institute one of the most compelling education stocks to buy for the long haul.

Adtalem Global Education (ATGE)

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As one of the for-profit higher education institutions among academic-related stocks to buy, I’m not entirely sure how a potential education tax under Elizabeth Warren – or any progressive leader – will affect it. It’s no surprise that for-profit schools attract controversy for their focus on shareholders rather than students. Still, Adtalem Global Education and ATGE stock may be worth a look, particularly if an academia overhaul benefits the entire spectrum.

A successor to the DeVry Institutes, Adtalem presently focuses on education programs that are relevant and have a long, durable pathway to financial success. Primarily, Adtalem offers programs in medicine and veterinary disciplines. While the Covid-19 pandemic may force some students to think twice about a career in medicine, veterinary work is definitely a compelling sector.

Sure, I do have some questions about the economy and how that will affect pet ownership statistics. But once we’re out of the woods (and hopefully soon), millennials represent the biggest share of pet owners in the U.S. That’s something to keep in mind if you have a patient outlook on ATGE stock.

Bright Horizons Family Solutions (BFAM)

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Should elements of a possible education tax provide retroactive benefits, then Bright Horizons Family Solutions is one of the top names you should consider for stocks to buy. Unlike the other companies mentioned above, Bright Horizons focuses on early education and development. In other words, it’s not for you but for your children.

Of course, any parent worth a darn will do anything for their children, especially if that involves education and giving them a solid head start in life. However, with so much going on – and apparently for many workers, remote operation during the worst of the Covid-19 crisis didn’t help – parents often have little time to actively support their children’s education. In the worst case, they simply don’t have the money.

However, if an education tax brings some relief – such as retroactive student loan forgiveness – this could free up funds for early development programs. Granted, this is a bit of a stretch but I still think that BFAM stock is worthy of consideration if we get an education overhaul.

2U Inc (TWOU)

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Irrespective of whatever happens with an education tax, households in the future will themselves undergo a rethink about the academic industrial complex. Yes, a college degree is important but so is not starting off with a six-figure debt load. However, technological platforms can go a long way in solving financial concerns, which makes 2U Inc one of the more forward-thinking education stocks to buy.

Partnering with non-profit academic institutions such as the University of Miami and Vanderbilt University, 2U offers online degree programs that fit the hectic schedules that young people work these days. As well, 2U provides continuing education programs, providing core curriculum that is pertinent to the ever-changing digital environment. Frankly, TWOU stock could be an investment in how we approach higher education moving forward.

Obviously, the pandemic provided 2U with a free and organic marketing opportunity. Now, it’s not just cost that students are worried about. Instead, health concerns still weigh on many Americans regardless of their age. Best of all, the underlying business of TWOU stock is flexible to avoid many of the disruptions that could hurt traditional institutions.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

Article printed from InvestorPlace Media, https://investorplace.com/2021/03/7-education-stocks-that-could-benefit-from-wealth-tax/.

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