Alabama, Arizona, Texas, Georgia, Florida – Anti-Immigration Laws Raise Private Prison Stock Prices
Management and Training corporation just secured a multi-million federal contract. CCA is planning multi-million dollar expansions in California, texas and Florida.
The GEO group stock option has seemingly doubled in recent times. Politicians are rushing to pass more laws in their own states – they must have invested in these stocks too! – Axel
NEW YORK (TheStreet Ratings) — The free market conservatives in Alabama, Arizona, Georgia and Florida must really love undocumented immigrants.
Instead of subjecting undocumented workers to back breaking, minimum-wage work, new laws are being passed to provide free room and board for them within the prison system. With the trend toward privatization, every new immigrant prisoner is now a potential source of corporate revenue.
The two public companies positioned to collect around $90 per day for each inmate housed are both ‘Buy’. Corrections Corporation of America(CXW_) and The GEO Group(GEO_), are leaders in the private prison industry.
On Thursday June 9, Alabama’s governor Robert Bentley signed an immigration law, similar to those of Arizona and Georgia, to use state police to check the immigration status of drivers pulled over for traffic infractions. Until these laws are found unconstitutional they will push up the number of prison inmates.
On Wednesday, June 1, The GEO Group announced a deal with the U.S. Immigration and Customs Enforcement (ICE) to house detainees at a 650-bed expansion to their existing facility bought from the city of Adelanto, California a year ago. GEO Group expects the facility to be full by August 2011 and build room for an additional 650 beds by 2012. To sweeten the deal, the company is guaranteed a 75% occupancy rate. At $42 million in expected revenue from the facility breaks even on renovation costs in less than three years.
In Florida, Governor Rick Scott’s recently passed budget also shifts some Florida prisons to private hands.
Exchange-traded funds are the wrong way to play this privatization trend. Macquarie Global Infrastructure Total Return Fund(MGU_), the most concentrated in Corrections Corp of America at 2.1%, is rated in the ‘Sell’ range as is First Trust Industrials AlphaDEX (FXR_) holding just 1.2% CXW. Vanguard Small Cap Growth ETF (VBK_) is ranked in the middle of the pack as a ‘Hold’ but contains just 0.3% of Corrections Corp of America.
Three ETFs rated at ‘Hold’ own shares of The GEO Group. However, at a maximum stake of 0.6% of assets, iShares S&P Small Cap 600 Value (IJS_), SPDR S&P 600 Small Cap Value ETF (SLYV_), and iShares Morningstar Small Growth(JKK_) hardly budge the investment outcome needle on movements in the underlying stock.
Continue to focus on direct holdings of Corrections Corporation of America until the political winds shift.
– Reported by Kevin Baker in Jupiter, Fla.