I’ve been accumulating IDP Education (IEL) under $19 @cbirtles. Today it will trade ex dividend (25cps, 77% franked). Now that It is trading ex dividend we might see even more pressure on the share price. I wouldn’t be surprised to see IEL trade close to $18 over the next few days. I think this could be a unique contrarian opportunity.

I think in the short term (a year or two) IEL’s earnings might be impacted by international visa reductions, and opening up the Canadian market to English test competition. However, IEL is a market leader and their earnings are still growing.

Short positions on IEL stock are still at record highs (over 10% shorted). The bearish sentiment by shorters is at odds with analyst consensus (14 analysts, Simply Wall Street data) expecting earnings to continue growing at over 14% per year. I don’t know who will turn out to be correct, but if it is the analysts then these short positions will need to be bought back!

I think IEL is a long term contrarian investment. I don’t expect a quick turn around given the visa restriction set backs, and the share price might get cheaper still while this plays out. However, I see the visa restrictions as a temporary hurdle which will create a pent up demand for international students in the longer term. For me this is a unique opportunity to buy a high quality business (average ROE +30% ) when it has very little love from the rest of the market.

Accumulating IRL (4.7%) and SM (13.8%)