Trade School Stocks Surge Amid Rising Demand for Skilled Labor

Trade school stocks are soaring as demand for skilled labor rises. Companies such as Nvidia and AMD are experiencing growth due to increased demand for skilled workers in fields such as technology and innovation. Experts like Bernstein's Rasgon and Advisors Capital's Feeney are advising investors to take note of this trend.

Trade school stocks are experiencing a significant surge in demand, driven by a growing need for skilled labor across various industries. Companies like Lincoln Educational Services (LINC) and Universal Technical Institute (UTI) are leading the pack, with their stocks among the top performers in the Russell 2000 Index over the past two years. Universal Technical Institute’s shares have surged by around 335%, while Lincoln Educational Services has seen a 220% increase, compared to the index’s 12% advance [1].

The demand for skilled workers is being fueled by several factors, including a skilled worker shortage and the federal government’s push to increase manufacturing in the U.S. The pandemic has also played a role, as many skilled trades were deemed essential services, leading to a cultural shift in attitudes towards vocational education. “There’s a cultural shift going on,” said Alexander Paris, president of Barrington Research Associates. “For 50 years, the trades have been out of favor for a number of reasons, including educational barriers, the reduction of trade school programs in high school, and every parent saying, ‘No son of mine’s gonna be an auto mechanic’” [1].

The economic appeal of vocational education is another key factor. Unlike traditional colleges, vocational schools operate on relatively lean operations, with high flow-through margins. “The flow-through margins are high,” said John Barr, portfolio manager of the Needham Aggressive Growth Fund. “It’s like 60% to 70% for a new student” [1]. This makes vocational schools well-positioned to capitalize on the growing demand for skilled workers.

The future looks promising for trade school stocks, but there are also challenges to consider. Rapid expansion could pressure margins, and the schools may be too dependent on federal student aid programs and corporate partnerships. “Speed can kill,” said Jerome Grant, CEO of Universal Technical Institute. “We can’t do six UTI campuses a year” [1]. The key to success lies in expanding conscientiously, focusing on high-quality student training and employment opportunities.

Meanwhile, technology stocks like Nvidia (NVDA) and Advanced Micro Devices (AMD) are also experiencing growth due to increased demand for skilled workers in fields such as technology and innovation. Nvidia, for instance, has been a leader in AI chip technology, with a market share of up to 92% in data centers. The company’s AI chip architectures, Hopper and Blackwell, have been highly successful, and the continuous push for computing power and efficiency makes Nvidia a solid investment [3].

Investors and financial professionals are advised to take note of this trend. Experts like Bernstein's Rasgon and Advisors Capital's Feeney are advising investors to consider the long-term potential of these stocks. “The world will continue to change, and technology will play a big part in that,” said an analyst from The Globe and Mail. “By 2035, once again, some of today's newest innovations will become normal” [3].

References:
[1] https://finance.yahoo.com/news/trade-school-stocks-soar-demand-161401669.html
[2] https://www.investopedia.com/nvidia-amd-agree-to-pay-15-percent-of-china-chip-revenues-to-us-update-11788331
[3] https://www.theglobeandmail.com/investing/markets/stocks/META/pressreleases/34036563/5-tech-stocks-you-can-buy-and-hold-for-the-next-decade/