The investors who own shares in the company should be wondering what has gone wrong at Oliver's Real Foods (ASX:OLI). I doubt they are particularly pleased with the share price.

In my opinion the problem has to do with management.

The basic offering is fast, healthy food, sold at highway rest stops. While Australians (myself included) don't mind a burger and chips, plenty of us prefer something leaner on occasion, so there are real prospects there. But it didn't take long for me to discover that Oliver's veneer of respectability obscured a dark secret: the founder and (former) CEO, Jason Gunn, has a history of using the company to oppose vaccination.

Pro-science blogger Reasonable Hank examined the situation back in 2016. And multiple sources have confirmed to me he is unapologetic in his stance.

Now, in his 1977 Letter to shareholders Warren Buffett said:

"We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety. We want the business to be (1) one that we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and (4) available at a very attractive price."

One might reasonably argue that Oliver's Real Foods satisfies three of those four criteria. And there's no doubt that judging honesty and competence is difficult. But when executive board member Jason Gunn has a history of posting anti-vaccination videos, it does not fill me with confidence. Personally, I believe that this aspect of the business should have been disclosed in the prospectus.

Why, you might ask?

Because it is not just the former CEO who espoused anti-scientific views with regards to public health. It was, and is, the company itself that has spread this propaganda. You can see for yourself, below:

So the company, Oliver's Real Food said "we are not anti Vax, just anti UNSAFE Vax". OK then.

Here are two more examples of the company using Facebook to spread anti-science propaganda, from Reasonable Hank. I presume these posts have since been deleted by the company (multiple investors, including me, have been in touch with Oliver's about the way it uses social media).

When I queried the company on this I was told that this anti-vaccination material had been removed. I checked multiple Oliver's stores (where they also sell books), and as of March 2018, while anti-vaccination material was not obviously present, the company was still selling books offering a variety of pseudoscience. You can see in the picture below a book called, "Cancer: why we're still dying to know the truth".

Let us examine an excerpt:

"Breast cancer serves as a poignant yardstick… Can we beat cancer? Yes. It's already done. The knowledge to conquer cancer was understood many decades ago but the facts never made it into the public domain until relatively recently…. and yet amazingly, the truth is still suppressed, lies disseminated, people hounded and jailed in order to protect a voracious and highly profitable corporate agenda."

Righto. So what is the cure for breast cancer, according to the books sold at Oliver's Unvaccinated Foods?

"…a wide range of cancers has been reported to respond very favourably to the combined metabolic protocol. Lung cancer, pancreatic cancer, liver, brain, leukaemia, lymph, bone, testicular, prostate, skin, breast, uteral [sic], cervical, colonic, etc. As time progresses and medicine becomes more accepting of B17, a wider range of data will be amassed. Internet sites operated by doctors practising Metabolic Therapy are a great source of information for individual case testimonies and details of treatments. Please see the Internet references listed in this book."

Ahh yes, vitamin B17, a 'metabolic treatment' allegedly suppressed by med science academics and doctors alike. Part of the conspiracy of silence, to profit from selling pharmaceuticals and surgery.

Of course, this theory is not proven.

My first question is this: why is the founder of Oliver's allowed to use the store network, which is a shareholder asset, to spread this misinformation?

And my second question is: are directors fulfilling their fiduciary duties to shareholders by allowing shelf space to be used to display niche, conspiracy theory books, rather than a more profitable use?

In my opinion Oliver's has significantly underperformed its potential under the prior CEO.

Under new CEO Gregory Madigan, I believe this company has potential to create value for shareholders by serving its customers nutritious meals.

In my opinion spreading pseudoscience is unethical, a waste of shelf space in store, and undermines the company's duty to shareholders, customers, and broader society.

Remember, newborn babies rely on us to vaccinate, in order to protect them from disease. Newborns do not have a sufficiently developed immune system to benefit from vaccines such as the whooping cough vaccine. Herd immunity helps prevent this.

In my opinion it would be a positive for Oliver's if Jason Gunn resigned from the board. He is, after all, a man who appears to be either unwilling or unable to understand herd immunity.

Motley Fool investment advisor Claude Walker does not own shares in any of the companies mentioned in this article. You can follow Claude on Twitter @claudedwalker. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. 

The post Would Oliver's Real Foods Benefit From Board Renewal? appeared first on The Motley Fool Australia.

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With many people sitting on impressive gains, Getswift Ltd (ASX:GSW) certainly is a company that has captured investors' imaginations, and made some significant profits for some (including a couple of my colleagues). I'm very happy for those winners, who may be wondering if they should take some profits. Meanwhile, those who bought around $3 in the last couple of weeks, may be feeling a little uncomfortable, but are hoping that the stock will continue its voyage up and to the right.

Yesterday, my colleague shared this screenshot with the team:

Traders Investors might well be wondering why the price moved so much yesterday. While there are a number of possibilities, I can't help wondering if the reality is that the universe is trolling me.

You see, just the day prior I wrote this short missive on why the company had fallen 23% over a couple of weeks. Murphy's Law therefore dictates that the stock would pop the next day. Of course it would. I even said I would not be buying or holding the stock until I see some revenue growth! 

Universe: 1

Claude: 0

Clearly, my penchant for revenues has seen me sitting on the sidelines. If you had bought Getswift shares around the time I published my article on Wednesday, and sold yesterday, you could have made 10% in a day. That's an annualised return of around 2,229,314,236,904%.

Now, if you can reliably trade stocks and make 10% a day, you should probably do that.

However, if you're keen for some buy-to-hold investments the stocks below may interest you…

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Former hot stock Getswift Ltd (ASX: GSW) has seen its share price smashed almost 25% in less than two weeks, since momentum traders and other investors have begun abandoning the stock, due to its loss of momentum or rather optimistic valuation.

At its peak, the company had a market capitalisation of around $450 million, remarkably close to the peak market capitalisation of fellow story stock 1Page (ASX:1PG), before it started its painful descent to (virtually) zero.

I am happy for my colleague Owen Raszkiewicz, who seems to have nailed the (temporary?) top with this article urging caution about Getswift.

It may be that the reason that the Getswift share price is falling is that it was previously overvalued.

There appears to have been very little published valuation work done on the company, and the work that does exist is optimistic in style.

For example, my colleague wrote:

"When this deal hits its peak, management estimates that it will generate annual sales in excess of $138 million.

Based on this deal alone and the sector's average price-to-sales ratio of 4.3x, I believe GetSwift could easily command a market capitalisation of $593 million.

If you add in the other deals it has on the table, excluding those that are in the works, then I see the company being worth upwards of $700 million in two to three years."

However, this analysis assumes that the company can grow revenue to over $162 million within a couple of years. While the company has certainly tried to lead investors to believe this is possible, this outcome is far from certain.

For example, the company says its much touted partnership with NA Willliams "is expected to significantly increase the company's reoccurring revenues by more than $138,000,000 per year once fully captured." It did say the project "will take at least 15-19 months due to the project scope, size and complexity of the channel partners," but I read that as a minimum, rather than an expected completion date. I would not be confident in assuming that means the company will be billing $138m in revenue within 2-3 years. I also wonder whether it is guaranteed to eventually reach $138m, since the announcement did not mention what the contracted minimum amount of yearly revenue from the deal is (if any).

The company also recently announced that it had surpassed 3 million deliveries "less than 3 months after reaching its second two million deliveries." That implies the company supported no more than 1 million deliveries in the last 2 months. At that rate — even assuming they get 30 cents per delivery (which they won't, due to volume discounts) — revenue for a full year would be no more than $1.8 million. Of course, it should continue growing throughout, but the company clearly has a long way to go until it reaches the kind of revenues some shareholders expect.

Meantime, there are lots of different software programs that do something similar to what Getswift claims to do. Indeed, whereas Pizza Hut is apparently going to use Getswift, Domino's Pizza Enterprises Ltd. (ASX: DMP) has its own software. Meantime, Zoom2U powers DHL deliveries, offering at least some of the advantages Getswift says it can offer. Other competitors include Sendle, Onfleet, Bringg and Shipster. Now, I'm not saying that any of these other options are necessarily better than Getswift, but nor is it clear to me why Getswift is so much better than them. To me, it looks like a reasonably crowded space.

I have no real view on whether Getswift is a good or a bad investment. However, I have seen many companies promise massive future revenue, but only some of them deliver. Thus, I would not hold shares at the current share price until the company can actually show some significant revenue and gross profit (if not actual profit). However, I would not rule out the possibility that the company could succeed in the long term, either.

The post Why Getswift Ltd Dropped 23% In Less Than 2 Weeks appeared first on The Motley Fool Australia.

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Across the country many investors, especially those just starting out, make a simple mistake that can mean their valuation of a company is way off.

That is, they get the number of shares on issue wrong. And that means they calculate market capitalisation incorrectly.

Allow me to explain.

If you use CommSec (or other data providers) to ascertain the market capitalisation of a company like Buddy Platform Ltd (ASX:BUD) you will see it is $75 million.

However, if you look at the company's most recent Appendix 3B you can see that it has over 200 million shares not quoted on the ASX.

Therefore, there are 589 million quoted shares, and 215 unquoted shares. This gives a total of 804 million shares, and a market capitalisation of a bit over $200 million at the current share price.

Now Buddy CEO Dave McLauchlan is on record saying it is up to analysts to calculate market capitalisation based on tradeable shares, if they want (Note: wording changed slightly). The normal thing is for ASX companies to report market capitalisation as the total number of shares on issue (you can see this in many presentations). However, even using Dave McLauchlan's second alternative definition of market capitalisation as "tradeable shares", the Commsec market capitalisation is still wrong. There are 589 million listed shares that are tradeable, so the tradeable market capitalisation of Buddy Platform is $147 million.

There are countless other companies that have an incorrect market cap displayed by Commsec or other providers. Many companies make it very clear what their actual market capitalisation is in their company presentations. However, investors should always double check the market capitalisation of a company with the actual documentation, since you cannot rely on the data provided automatically by data providers.

One popular company that has a lot of unquoted shares is Getswift Limited (ASX:GSW). Commsec states it has a market capitalisation of $195 million, but with over 150 million shares on issue, its market capitalisation is actually over $375 million.

The good news is that more established, profitable, dividend paying companies usually do have the right market capitalisation from data providers, so this issue is mostly a concern for people who invest in higher risk, recently listed, small-cap stocks.

The post Why Some Investors Get Market Capitalisation Wrong appeared first on The Motley Fool Australia.

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"Invert, always invert." — Charlie Munger

Short sellers borrow shares in a company in order to sell them on market. Because they will have to buy back the shares in order to return them, short sellers are therefore betting that the share price will go down. Academic studies have shown that short sellers are good for the economy, and help spot fraud, but the key question for investors is whether they should avoid shorted companies, or bet against the shorts by buying shares.

Vocus Group Ltd (ASX: VOC) had about 16.3% of its shares sold short on the 22nd of May, 2017, with 101.5 million shares sold short. That's around 13 times the daily average volume of shares traded since the share price tumbled on high volume in early May. That suggests that if the short sellers get cold feet en masse, we could see a short squeeze, although we'd probably need some pretty good news for that to happen.

One likely reason short sellers are targeting Vocus is that the market is currently uncertain about how the NBN Co will impact companies like Vocus. On top of that, there is now talk of the government introducing a broadband tax of over $7 month. While that would impact all telcos, not just Vocus, the result would likely be that some customers consider if they can drop down to a cheaper plan. Also, TPG Telecom Ltd (ASX: TPM) is planning to introduce a mobile service, which will probably put downward pricing pressure on all types of internet, not just mobile.

However, the larger issues stem from the fact that Vocus has arguably overstretched on acquisitions. The acquisitions of M2 Telecommunications and NextGen have imperilled the balance sheet, which now has over $980 million in debt. Time and time again, we see that companies have no defence against short selling when they have heavy debt loads.

A comparison with another short selling target can help us consider how strong the short thesis against Vocus is. Whereas Domino's Pizza Enterprises (ASX: DMP) relies on convincing more franchisees to open stores, Vocus receives fairly sticky revenues from customers. Importantly Domino's is trading on about 40 times earnings, whereas Vocus is trading on about 12 times the forecast underlying earnings. That means that there is a lot more potential for Vocus to 're-rate' to a higher multiple, than there is for Domino's. On the flip side, Vocus is already pretty cheap, and ultimately the company could probably just raise more capital to get out of its debt hole. While that would mean dilution for shareholders, it would likely do some serious damage to the short thesis.

As a result, I think Domino's Pizza is a better short selling target than Vocus.

However, the fact that the former CEO of Vocus sold his shares and quit the company has me feeling cautious about the stock. I'll wait a while before I buy shares myself, if I do buy shares, because I don't like the high debt levels. Asides from the debt, I think the company is in better shape than many give it credit for.

Vocus might be one for the contrarians, but many investors prefer stocks with better earnings momentum. As long as earnings per share keeps growing, year after year, shareholders tend to make a pretty penny. While I do think that there is room for a contrarian play like Vocus, few would disagree that investors should be looking for future blue chips for capital gains.

There's nothing more satisfying than betting against short sellers, and winning, because they then have to buy back the shares at higher prices, sometimes causing a 'short squeeze'. But I personally take a cautious approach and only bet against the short sellers if I have good reason to believe they are wrong. Still, Vocus could be very interesting, once debt is under control…

The post Why are short sellers targeting Vocus Group Ltd shares? appeared first on The Motley Fool Australia.

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Short sellers borrow shares in a company in order to sell them on market. Because they will have to buy back the shares in order to return them, short sellers are therefore betting that the share price will go down. Academic studies have shown that short sellers are good for the economy, and help spot fraud, but the key question for investors is whether they should avoid shorted companies, or bet against the shorts by buying shares.

iSentia Group Ltd (ASX: ISD) had 11.5% of its shares sold short on the 22nd of May, 2017, with 23 million shares sold short. That's around 10 times the daily average volume of shares traded during May. That means unless there is some extremely good news, there is unlikely to be a scramble to cover short positions, and we probably won't see a short squeeze.

One likely reason short sellers are targeting iSentia is that it spent up big on the acquisition of King Content, which turned out not to earn as much money as iSentia thought it would. Once the market found that out, the shares crashed, so it's fair to say there are plenty of disappointed shareholders. At the time, iSentia CEO John Croll said:

"What probably happened inside the last four months was there were some decisions taken inside King Content around the resourcing of new sales teams and the account management that were taken, in my view, premature to the proper transition across to the iSentia team and that has created a period where we didn't have a strong revenue pipeline coming into the business…"

The second likely reason short sellers are targeting iSentia is that its legacy core business is not growing particularly strongly, suggesting that it does not deserve a growth multiple. In the past at least, it's fair to say the market may have overestimated the core media monitoring business.

iSentia has net debt of over $50 million, thanks to the King Content acquisition. This means that it is in a weaker position than it was when it was a smaller company.

While I think Domino's Pizza (ASX: DMP) makes more sense as a short selling target than iSentia, I would say that iSentia makes more sense as a short selling target than Aconex (ASX: ACX). The main reason for this is that Aconex has a strong balance sheet compared to iSentia. It does not surprise me that short positions on iSentia have been reducing.

After all, based on the first half earnings, the company is only trading on around 16 times earnings, meaning expectations are not particularly high. Therefore, it's clear that should King Content perform better in the near future — and if the company pays down debt — then it's likely that there is significant upside from here.

Having said that, iSentia has disappointed shareholders in the recent past. In comparison one of our 'future blue chips' is a fast growing company with plenty of cash. And the company I'm thinking of has a longer listed history than iSentia, and appears to do the right thing by long term shareholders.

The post Why are short sellers targeting iSentia Group Ltd? appeared first on The Motley Fool Australia.

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Short sellers borrow shares in a company in order to sell them on market. Because they will have to buy back the shares in order to return them, short sellers are therefore betting that the share price will go down. Academic studies have shown that short sellers are good for the economy, and help spot fraud, but the key question for investors is whether they should avoid shorted companies, or bet against the shorts by buying shares.

Aconex Ltd (ASX: ACX) had 13.5% of its shares sold short on the 22nd of May, 2017, with 26.8 million shares sold short. That's around 29 times the daily average volume of shares traded during May. That means if the short thesis is disproved, there could be a scramble to cover short positions, and  we could see a short squeeze.

The most likely reason that short sellers are targeting Aconex is that it is priced for strong growth, the co-founders (including the CEO) and another board member have been sellers of shares and the company's growth disappointed prior to the first half results, subsequent to the large acquisition of Conject Holdings. Short sellers may be taking the view that organic growth is not sustainable at the levels the company says it can achieve, and that the acquisition may not be as lucrative as first thought.

However, it does not seem immediately obvious to me why Aconex is an attractive target to short sell. Certainly, Aconex seems like a more attractive (long) investment than Domino's Pizza Enterprises (ASX: DMP) which is also a target of short sellers. Whereas Domino's has hundreds of millions of dollars of debt, Aconex has zero debt and a cash hoard of about $40 million.

For this reason, I would be somewhat surprised if the decision to short the stock pays off, since the company could probably just buy back its own stock if it wanted. However, the fact that so many people are willing to short sell a company with plenty of cash makes me thing there might be something negative I don't know about — if you do know, please get in touch!

However, one thing I do know is that Aconex has disappointed shareholders in the recent past. Like Aconex, one of our 'future blue chips' is a fast growing company with plenty of cash. But the company I'm thinking of has a longer listed history than Aconex, and it's hard to imagine it has disappointed many shareholders.

The post Why are short sellers targeting Aconex Ltd? appeared first on The Motley Fool Australia.

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Short sellers borrow shares in a company in order to sell them on market. Because they will have to buy back the shares in order to return them, short sellers are therefore betting that the share price will go down. Academic studies have shown that short sellers are good for the economy, and help spot fraud, but the key question for investors is whether they should avoid shorted companies, or bet against the shorts by buying shares.

Domino's Pizza Enterprises Ltd. (ASX: DMP) had 10.8% of its shares sold short on the 22nd of May, 2017, with 9.6 million shares sold short. That's around 35 times the daily average volume of shares traded during May, suggesting that if the short sellers get cold feet, we could see a short squeeze.

The most likely reason that short sellers are targeting Domino's Pizza is that a lengthy exposé into underpayment of wages by franchisees, by Adele Ferguson and Mario Christodoulou, triggered an investigation by the Fair Work Ombudsman.

However, prior to this report, over 4% of Domino's shares were already sold short. That suggests that some short sellers either predicted the problems with employment conditions for workers, or they viewed the stock as overvalued even without these problems. Based on Morningstar analyst estimates, the company is trading on over 40 times 2017 earnings, so it certainly is priced for strong growth well into the future. It also has net debt of $265 million, so it could be vulnerable if earnings fall.

While that may or may not occur, I'd make the case that there are safer stocks which could still make you a pretty penny. While there's no doubt that investors should be looking for future blue chips for capital gains, that doesn't mean you have to take on the short sellers with controversial stocks like Domino's Pizza.

Certainly, it might make sense to keep an eye on Domino's, because if the share price falls to lower levels, one could readily argue that the potential rewards more than justify the risk. But since the company is currently still optimistically priced, it's hard to get too enthusiastic about it.

There's nothing more satisfying than betting against short sellers, and winning, because they then have to buy back the shares at higher prices, sometimes causing a 'short squeeze'. But I personally take a cautious approach and only bet against the short sellers if I have good reason to believe they are wrong. In the case of Domino's I'm not convinced either way, so I prefer look elsewhere.

The post Why are short sellers targeting Domino's Pizza Enterprises Ltd. shares? appeared first on The Motley Fool Australia.

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As most investors will know, the automated data aggregators like Google Finance often mis-state the market capitalisation of a company, because their automatic systems only count listed shares.

The correct definition of market capitalisation is the stock price multiplied by the number of shares outstanding. Anyone with google can figure that out:

Of course, many companies have some shares that are not listed (usually because they are escrowed). Typically, those companies go out of their way to inform investors of their correct market capitalisation in their presentations. You can see an example below.

However, the basic, obvious, and near universal definition of market capitalisation apparently is a more fluid concept for Buddy Platform Ltd (ASX:BUD), a company I have previously considered to be an interesting prospect. Indeed that company used the ASX announcement platform to draw investors attention to a research report published on the company.

That research report from State One Stockbroking states that the Buddy Platform "market capitalisation" is $23 million, at a share price of 8 cents, as you can see below.

However, as you can see they have used "quoted shares outstanding" not "total shares outstanding" which is used in the normal definition of market capitalisation. Now, if they had said "market cap of quoted shares", that wouldn't be a problem. But the usual definition of market capitalisation includes all shares. As a result, this is a very peculiar practice.

Now, a company is not responsible for what others write about it. I could say "Buddy Platform earns profits" or "CEO Dave McLauchlan is quick to correct errors" but me saying those things does not make it true. However, my question is why the company used the ASX platform to draw attention to a research report that used a very peculiar definition of market cap.

I asked the CEO of Buddy Platform, Dave McLauchlan, about this decision on twitter. You can see his response below:

Now, as an analyst I have been taught to use the normal definition of market capitalisation. I have yet to meet an analyst that disagrees with me on that, but I'd be keen to compile a list of analysts and CEOs who do not include all outstanding shares when calculating market capitalisation. If you know any analysts and CEOs that would like to be included on that list, let me know. So far, the only CEO I know of who accepts that definition of market cap is Dave McLauchlan, CEO of Buddy Platform.

And in the meantime, buyer beware. The true market capitalisation (not even fully diluted) of Buddy Platform is well over $64 million, at a share price of 8 cents. And you can discover an investment-grade company that uses the normal definition of market capitalisation, below…

The post Is the market confused about Buddy Platform Ltd? appeared first on The Motley Fool Australia.

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Loss making oil and gas behemoth Santos Ltd (ASX: STO) has suffered a calamitous fall from grace, with the share price down over 70% since October 2014, when the Australian National University chose to divest its shares on ethical grounds.

While good fortune saw ANU dodge a bullet, the pain may not be over for long suffering Santos shareholders.

The company is currently conserving cash, recently raising $2.5 billion by issuing shares at $3.85 apiece.

At the time, much loved AFR journalist Tony Boyd remarked that, "New shareholders entering the Santos share register will probably do quite well."

While this might be true in the long-term, it has not proved to be true in the short term, with shares currently trading at just under $3.30.

So could shares fall another 10%?

At present, debt rating agency Standard & Poor's gives Santos a BBB rating. Were this rating to be downgraded, it is very likely indeed that the share price would tumble further.

The ability for Santos to service its debt is all important, because even after raising over $3 billion in cash through issuing shares and selling assets, the company still has billions of dollars of debt.

There are two main ways it could struggle to service its debt. First, the oil price could stay lower for longer than anyone predicts. Fairfax reported last month that "S&P is assuming prices for Brent crude of $US50 a barrel for the rest of 2015, recovering only modestly to $US55 [in 2016]".

However, the current oil price is below $US35. If it stays at these levels, S&P may revisit its assessment of Santos!

So Santos Ltd shareholders will be praying the price of oil goes up…

The other major risk is that the company's Gladstone LNG project disappoints in some unforeseen manner.

In my view that is quite possible, since large infrastructure projects are very complicated, and even events like wild weather can hurt. On top of that, there is significant community opposition to the coal seam gas projects that are supposed to supply the LNG project.

In my view it is very possible indeed that Santos shares will fall below $3, though in the long term, a rising oil price could see shareholders laughing. Overall, though, the risk-reward equation remains unattractive compared to other opportunities on the ASX.

The post Could the Santos Ltd share price fall below $3? appeared first on The Motley Fool Australia.

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Far too few investors stop to think whether companies they invest in really earn sustainable profits.

And as investors in Vocation Limited (ASX:VET) have discovered, that can be a very expensive mistake. Yesterday, that company was placed into voluntary administration. Those investors who thought the company could endlessly profit from government subsidy of private education have seen their investment thesis backfire resoundingly.

Another company in the sector is Australian Careers Network Ltd (ASX:ACO), which saw its share price soar more than 170% in the last 12 months, before shares were abruptly suspended from trading on October 15 this year.

The "notices regarding non-compliances," that triggered the suspension came after an investigation by Fairfax that shone a light on the practices of brokers enrolling students in courses run by Australian Careers Network (ACN) subsidiaries.

Undercover footage supplied by Fairfax revealed a business culture that makes me very uncomfortable, and the Australian Skills Quality Authority wasn't blind to it either. It noted in a recent report that it "used the information published in the media to inform its regulatory strategy." To me, this is an example of how overly aggressive sales practices are an alarm bell when it comes to selling products that are subsidised by the government.

Aggressive growth then a trading suspension

Australian Careers Network listed on the ASX less than a year ago, in December 2014. Since then, it has grown revenues rapidly, exceeding its own prospectus forecasts by over 75%. The company's strategy involves selling courses that are supported by government programs.

At the company's AGM, Chairman Stephen R Williams said its strategy "led to our acquisition of Phoenix Institute of Australia (Phoenix) in January which enabled the Company to access the provision of higher education courses and adding new diploma courses on scope importantly accessing the VET FEE-HELP Scheme…"

And there's no doubt the federal government's FEE-HELP helped boost enrolments. "By widening our student base with VET FEEHELP Scheme accreditation," said Williams, "we experienced considerable growth in student enrolment numbers over the last six months…"

Should taxpayers be supporting Phoenix Institute students?

Australian Careers Network continues to update shareholders on its dealings with regulators, who delayed a number of FEE-HELP payments to the company's subsidiaries. On October 20, the Australian Skills Quality Authority (ASQA) stated its intention to cancel the registration of the Phoenix Institute. On November 24 ASQA confirmed it would revoke Phoenix Institute's registration as a training organisation. The next day, the company announced that the Commonwealth Department of Education and the ACCC have brought proceedings against Phoenix Institute.

While the saga is yet to play out, ACN shareholders ought to ask themselves if taxpayers are getting good value for money when they support students to study ACN courses.

For example, The Phoenix Institute offers an Advanced Diploma of Transpersonal Art Therapy, which can be completed within a year, for the price of $18,000.

To put that in context, that figure is somewhere between 50% and 75% of the cost a 3-year psychology degree at a good university.

But it is mighty steep compared to the $4,400 it will cost you to do a 1 year art therapy training course (not a government diploma) at the Centre for Educational and Clinical Art Therapy.

According to a promotional video from Phoenix Institute, its course provides "a really solid foundation about being able to offer creative and arts based activities to work with other people to enhance health and well-being." In that video, the Director of Studies says, "we don't deal necessarily with symptoms or diagnoses, rather we actually, really listen to the person…"

The fact is you don't need to do a $18,000 course to become an art therapist, or to learn to "really listen."

Foolish takeaway

Investors in fellow private education provider Vocation Limited have virtually lost their entire investment since regulatory scrutiny brought the company to its knees. Before investing in this sector, consider whether the government will keep supporting these companies. After all the Commonwealth will spend $3 billion this year alone on vocational education and training Fee-Help loans, while another $3 billion will be spent by the states subsidising certificate courses.

Is that sustainable?

The post Is Vocational Education A Trap For Investors And Taxpayers Alike? appeared first on The Motley Fool Australia.

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As the new-look federal government umms-and-ahhs its way through a defence of new coal mines, the new Prime Minister Turnbull should look to President Obama.

You see, the American President recently gave a landmark speech to announce the ditching of another great white elephant, the Keystone XL pipeline. He left no doubt that the project was not economically attractive, arguing, "The pipeline would not make a meaningful long-term contribution to our economy."

However, as a politician, and not an investment banker, President Obama knows that returns to society aren't always measured with a $ symbol. Indeed, he also gave a nod to environmental stewardship as another reason for rejecting the pipeline. "America is now a global leader when it comes to taking serious action to fight climate change," he said, "And frankly, approving this project would have undercut that global leadership."

A long-term focus on the environmental and social returns of investing in new coal mines is startlingly absent from our own leader's rhetoric.

A few facts for the new PM

One, your demand estimates are wonky. As the Australian Financial Review reported last week, the International Energy Agency (IEA) is "set to revise down coal demand forecasts." And in case you're thinking this is a one-off misjudgment by the IEA, let me assure you, it's not.

In every World Energy Outlook report since 2000, the research body has underestimated the deployment of renewables. The fact that the IEA consistently underestimates renewables should have any decent analyst questioning the accuracy of its future predictions.

Two, the business case for the new coal mines relies on unrealistic demand growth for coal. Year to date, coal imports to China are down nearly 30% in volume — and worse when it comes to price.

It shouldn't surprise anyone that when banks refuse to fund large projects like the coal export terminal at Abbot point, there's hard-nosed financial reckoning, as well as concern for the environment, at play. It's likely that some Australian coal companies will go bankrupt in coming years, and it's a bank's job to try to avoid the fallout.

Over in the US, it's already happening. Alpha Natural Resources, the second biggest US coal company filed for bankruptcy protection in August this year. The largest coal company in the world, Peabody Energy Corporation, has seen its share price fall over 90% in the last year, reflecting the risks posed by a falling coal price. Some analysts believe it too will eventually file for bankruptcy.

Now, it may seem obvious to the average Australian, but the political class seem to struggle with basic supply and demand. Apparently, here in Australia, we think what the world needs right now is massive new coal mines, despite the fact that existing coal companies can barely turn a profit. Our Australian approach to the coal glut can be summarised as follows: we're in a hole, so dig new holes.

No laughing matter

It would be laughable were the stakes not so high. Unfortunately, the various new coal mines proposed for Australia threaten one of our most important resources: water. Take for, example the mine proposed by Hume Coal, slated for the NSW Southern Highlands. It would sit less than 2 hours from Sydney, where, according to an independent report, "the detrimental impacts of coal mining on aquifer productivity would be substantial."

And of course, the miners are predicting higher coal prices. The Monthly recently covered the Hume Coal situation, revealing that the moderator at a community engagement meeting said, "we expect that by the time this mine comes on stream, the coal price will have recovered significantly."

Foolish takeaway

Australia is risking a lot on the hope that coal prices go up. Some proposals would risk damaging tourism on the Great Barrier Reef, while others would (literally) undermine prime farmland or result in lower water tables. As an investment banker, Malcolm Turnbull might have focussed on closing the deal, but as Prime Minister he should listen to President Obama when he points out, "Our biggest and most successful businesses are going all-in on clean energy".

The post Australia Running Backwards While The US Forges Ahead appeared first on The Motley Fool Australia.

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