Sunday, May 20, 2012

Are Your Stocks in Prison?

This private prison industry is an interesting business. However, stocks in this arena have been relatively flat over the last five years. One reason; since 2001, violent crime rates have dropped every year, according to the census bureau. This statistic is for both total number of crimes and the number of crimes per 100,000. But maybe this information is built into the prices of these stocks, and maybe there are some buying opportunities to help your portfolio get out of jail.

The largest company in this business, according to the free list of prison stocks at, is Corrections Corporation of America (CXW), a Nashville, Tennessee owner and operator of privatized correctional and detention facilities in 20 states. The stock trades at 17.5 times current earning, and 15.5 times future earnings, with a generous yield of 3.1%. Although quarterly revenues were up 2.4%, earnings for the latest quarter tanked over 21%. This was primarily due to the $4 million of start-up costs at Jenkins and Cimarron, the reduction in U.S. Marshals populations at certain facilities, and an increase in employee medical and workers' compensation claims.

The second largest is Geo Group (GEO) which trades at 17.8 time current earnings and at 13.2 times forward earnings. The company operates in the United States, Australia, South Africa, the United Kingdom, and Canada as a provider of government-outsourced services, primarily correctional, detention, mental health, residential treatment, and re-entry facilities. Earnings dropped 10.5% on a revenue increase of 5.3%.

The short list of prison stocks is available at, which can be downloaded, updated, and sorted.

Disclosure: Author didn't own any of the above at the time the article was written.


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