Buying Stock In Prisons
Buying Stock In Prisons ->->->-> https://geags.com/2tDSb5
That makes sense given that the Democratic party has recently coalesced around banning private prisons, but the reality is that mass incarceration has been increasingly unpopular for even longer. The related political headwinds have been clear to corporate leaders for years, and have encouraged a pivot towards providing a broader, less-controversial mix of services to the government.
More than 2.4 million Americans currently call a jail cell their home, and the industry is booming. Thanks to a favorable legal environment and a trend toward privatization, private prisons are a booming billion-dollar industry.
Private prisons provide value to government in reducing costs and improving correctional facilities. They add to this by acting as a specialty financier and transferring the huge capital expenditures required to build and expand a prison onto their own balance sheet.
There are several tailwinds that could propel private prisons to new heights: private correctional facilities house only a fraction of all inmates in the United States and the world, state and federal governments are more willing than ever to outsource prison management to a private company, and the number of incarcerated people continues to grow at a rate faster than the general population.
Furthermore, prison management companies are awarded long-term contracts spanning years and even decades, making them very similar to utility stocks in that the service is sold on subscription for years and years of guaranteed revenues. Additionally, local and federal government agencies are now guaranteeing minimum levels of occupancy in new jail contracts (private prisons are paid per inmate), which sets a minimum amount of profitability from quarter to quarter and year to year.
Historically, the trend is favorable for private prison companies. The number of incarcerated people has consistently grown year over year while the percentage of inmates in private prisons has also grown as a percentage of the total number of inmates.
A company's valuation should correspond with the predictability and reliability of its cash flows. I find prisons to be highly-valued: Corrections Corporation of America (CXW) sells for 18 times forward earnings while Geo Group, Inc. (GEO), which operates in the United States, Canada, Australia, the United Kingdom, and South Africa sells for just under 15x forward earnings estimates.
Corrections Corporation of America is expected to soon convert from a C corporation to a REIT, which would require the firm to pay out 90% of its earnings in the form of dividends. The stock seems to have advanced as this change is priced into the market.
While prisons can be seen as having similar economics of a regulated utility company with faster earnings growth, the inability to predict long-term shifts in the business model leads me to favor relatively pricier utilities, which provide roughly the same yield as CXW would if it converted to a REIT with much more predictability going forward.
Beyond the basics of private prisons, it appears famous investors like Michael Burry are also jumping on the trend of private prisons. Michael Burry, the Chief Investment Officer of Scion Asset Management, was one of the few who correctly predicted the housing market crash made famous in the movie the Big Short.
The prison industrial complex also includes companies that sell goods and services at inflated prices to incarcerated people and companies that pay low or no wages for prison labor. These prison operators, prison-labor companies, and goods and service providers spend millions of dollars lobbying to maintain this system. That effort in and of itself suggests that profit is a stronger motivator for private prisons than keeping communities safe or rehabilitating those who have committed crimes.
Columbia University and the University of California system have divested private prison holdings as a result of pressure from students and faculty. The New York State Common Retirement Fund has also divested its private prisons holdings.
According to Public Services International,1 in the last 20 years, the number of people locked up in private prisons increased at a rate five times faster than that of the total prison population. One has to wonder why. Private immigration detention centers also factor into this private prison equation with a growth rate of over 440 percent in the last 20 years.
Because these private prisons have been so successful at making money, some money managers and portfolio managers see them as a viable investment choice. Private prisons can easily get included in the default investment choices in target-date mutual funds or 401(k) or 403(b) investments.
So, what happens when you are staunchly opposed to private prisons and the profits they turn, but your employer-sponsored retirement portfolio is teeming with companies involved in the prison industrial complex You could choose to forego your plan and invest in an IRA where you can find your own investments. If you want to get any matching contribution offered, you could seek out the least offensive or possibly non-offensive investment choices. But this may not allow you to have a balanced, risk-adjusted return portfolio suitable for your retirement needs. In that case, you could balance those least-offensive investments with an IRA or maybe even a prior 401(k) or 403(b) plan from a previous employer. That complexity may lead you to look for an investment adviser representative with the proper screening and investing tools to help you create that portfolio.
Michael Burry's quarterly 13F SEC filings are always highly anticipated and closely monitored by investors. And his filing for the June 30 quarter did not disappoint. Dr. Burry sold everything he owned one quarter prior, including Warner Bros. Discovery (WBD), Meta Platforms (META) and Alphabet (GOOG, GOOGL). But one stock he kept: The GEO Group, Inc. (NYSE:GEO).
Serco runs six for-profit prisons in the U.K., all of which are nearly filled to capacity. Britain holds a bigger proportion of inmates in for-profit prisons than any other country except Australia, and the market is dominated by three companies: Serco, G4S Plc and Sodexo SA. In January, Serco was handed a 1.9 billion-pound, 10-year government contract to provide support services for asylum seekers.
Founded by George Zoley in 1984, Geo Group is one of the only two pure-play stocks that gives investors a chance to speculate on the private prison industry in the U.S., estimated to be worth close to $4 billion annually, according to campaigners at Prison Policy Initiative. (The other is CoreCivic, based in Nashville.)
Williams was an employee of TBeck Capital Inc., a purported investment banking and securities trading firm in Grapevine, Texas. Lopez was a securities broker-dealer who provided services to TBeck Capital. According to court documents, from June 2006 through December 2008, Williams, Lopez and their co-conspirators engaged in a scheme to manipulate the price and volume of stocks traded in the over-the-counter market.
According to court documents, companies owned and controlled by a co-conspirator obtained control of large positions of free-trading stock in various publicly traded companies. Williams, Lopez and others then coordinated trades with each other and with other alleged co-conspirators to create the false appearance of greater investor interest in the stock. Williams and Lopez admitted to trading stock in their own names as well as through TBeck Capital and other companies to keep the stock price artificially inflated. These actions allowed the defendants and their alleged co-conspirators to then sell that stock at an artificially high price.
New Jersey's pension fund is selling $1.3 million in stock in a company that runs 11 processing centers for illegal immigrants on behalf of the federal government, after activists contrasted the holding with Gov. Phil Murphy's pro-immigrant rhetoric.
The state pension fund is shedding its investment in GEO Group, a Florida-based operator of private prisons and immigrant detention centers, after a national outcry over family separations at the border in June drew attention to the role of private companies running detention centers for U.S. Immigration and Customs Enforcement.
But even as Murphy and other state leaders spoke out, the New Jersey State Employees Deferred Compensation Plan, which is separate from and much smaller than the pension fund, was quietly buying stock in GEO Group and CoreCivic, a Tennessee-based company that also operates immigrant detention centers, including the Elizabeth Contract Detention Facility in New Jersey.
Securities and Exchange Commission filings show that the $548 million deferred comp fund bought $981,000 in stock in GEO Group and CoreCivic in July, as the companies' stock surged in part due to the Trump administration's more aggressive approach to capturing and detaining people who cross the border without papers. The holdings were first reported by Documented NY, a news website that covers immigration from New York City.
After The Record and NorthJersey.com asked state Treasurer Elizabeth Maher Muoio's office about investments in GEO Group and CoreCivic by both the deferred comp fund and the $78.6 billion pension fund, spokeswoman Jennifer Sciortino announced that the fund had identified a single $1.3 million holding in GEO Group and would sell it. She could not say when the state purchased the stock.
Our Division of Investment has reviewed the investment merits, including consideration of Environmental, Social and Governance (ESG) issues, and consistent with its fiduciary responsibility elected to sell the security,\" Sciortino said in a statement referring to the GEO Group stock. \"Issues such as this underscore the need to have a formalized ESG policy in place to help inform investment decisions.\"
The reason private prisons are back in vogue is simple: Trump has made sweeping p