I spend more time reading every day than I do anything else. I am from the Charlie Munger school of thought, believing one of the keys to whatever success we have in life comes from reading anything and everything you can find. I read SEC filings, mainstream newspapers , industry journals, academic papers and anything else that might give me an edge when to comes to markets and life. Whatever success I have in life, comes as a result of reading all the time.
Much of my reading is naturally focused on the banking sector -- and these days, fintech (financial technology) is a big part of that. The other day while browsing fintech stories, I ran across an article that opened my eyes to a whole new source of potential 100 to 1 stocks.
The article was written by the David Bainbridge, the CEO of Knowledgemotion, a British company that helps makes it easy for education providers to find, license and use video content. The title of the piece is "Edtech Is The new Fintech," and it points out that education technology is potentially a $5 trillion dollar global market.
There is an enormous need for technological innovations that help us educate our kids, as well as adults, more efficiently and completely. The author points out that there has been little investment in the area, as in 2015 more money was put into Uber than was invested in the entire edtech industry.
I have had kids in the public education system for a quarter century in California, Maryland and now Florida. I have nothing but great admiration for frontline teachers, but the truth is that our education system is a mess. Budget priorities are hopelessly out of whack, as we have a bloated bureaucracy while students share books. If we put as much money and effort into administering our schools -- and making it easier and cheaper to educate our kids -- as we put into getting a ride to the bar and a room at the beach, we could make substantial improvements in our education system. The innovative companies that turn their attention to these matters will make themselves and their investors incredibly wealthy, in the process.
There are not too many publicly traded edtech opportunities yet. Most of them are still in the early stages of the game, and posting losses. Many of them will need additional financing in the future. They are about as far from traditional value stocks as you can get, but I see such a great need for edtech that I am evaluating all of these companies -- and will be a buyer of my favorites when this market finally rolls over.
A couple of companies have caught my eye, so far. I have talked about K12 (LRN) before. This company is a technology-based education company, offering proprietary curriculum, software systems, and educational services to facilitate individualized learning for students primarily in kindergarten through 12th grade. Many states, including Florida, use its services to provide at-home education for kids that just do not do well in a traditional classroom environment. Although there have been some bumps along the way, this company does a pretty good job, overall. The future of virtual learning is enormous -- and so far this company is the industry leader.
I like what I see going on at Chegg (CHGG) , as well. This company has what it calls a student-first connected learning platform: It makes higher education more affordable, more accessible, and more successful for students. Chegg helps students find textbooks to buy -- and even rent -- in both physical and digital form, to reduce costs. It also has tutoring and homework-assistance program for students in a wide variety of subjects.
Chegg offers a service that help kids find the right college and scholarships to assist in dealing with the cost of a higher education. It also assists with finding internships to help students prepare for a career. Earlier this year, it acquired Imagine Easy, a company that provides tools for students to improve their writing skills.
Both of these companies are working to make the education process cheaper and more effective. They are not classic value stocks, but they do have the potential to provide huge returns when we finally wake up and start investing as much in edtech as we do in mobile banking and online restaurant reviews. I will buy them in a weak market and tuck them away. I am also going to be scouring the markets for additional edtech opportunities -- to buy and hold for something close to forever.