Monday, September 25, 2006

The Upside Potential of Voting Republican

We view CXW as a pure play on the detention of illegal immigrants. $

"We've had a lot of new shareholders coming into the stock, with a shift from value investors to growth investors."

The upshot for investors now: The current excitement seems justified, but it will likely ramp up near-term volatility. Those interested in owning a share of the prison business should be thinking long term and bracing for inevitable bumps.

There are several critical drivers that have drawn the attention of growth investors, starting with the combination of prison crowding and low penetration for private-jail operators. "It's as if they run high-occupancy hotels where people can check in but they can't check out," says Paul J. Rasplicka, lead manager of the $1.4 billion AIM Capital Development Fund, which first added the stock in 2003. "State and federal governments' need exceeds available beds, and the company has them."

Federal prisons are operating at more than 130% of capacity, and two dozen state prison systems are operating at 100% capacity or higher, according to government statistics cited by the company. At latest count, there were about 2.2 million men and women in prison, the Justice Department says.

Bulls believe that Corrections Corp., with a market value of about $2.6 billion, is uniquely positioned to benefit, given that the company has about half the private-prison market. Meantime, private-jail managers have ample room for growth, with less than 7% of the national prison market.

Significant demand is expected to come from the Department of Homeland Security's Immigration and Customs Enforcement, or ICE. Under the new model for border enforcement, non-Mexican illegal border crossers are no longer set free while they await a hearing. People are now detained until their hearing, and Congress is being asked for funds to pay for more beds.

"ICE has been the catalyst that drove the stock and that broke down a logjam in demand," Jefferies's Mr. Hie says. Wallshite Joornal


Blogger Juke said...

A greater synergist than I am at this moment being weary could and should somehow get from ICE/CorrCorp to the housing bubble bursting in air and back again.
You know, like cells and cribs and bunks and all.
The rise in the financial rewards for investing in prison housing, and the simultaneous drop in financial reward for investing in, you know, housing.
Only set up with humor and panache and elan. The punchline being something to do with Sheol.

9/27/2006 7:52 AM  
Anonymous tom said...

Yes, that could be fun, especially if one were to tie in some of the enronesque elements of fraud common to both ventures, e.g.,

“Matt George noted he has completed more than 20,000 appraisals since 1974 and said that ‘fraud is rampant in our industry.’ He often reviews appraisals completed by other people for lenders. He said he has found that more than 50 percent are inflated.” housingbubble

I also see a mode of capital piety: a corporation vows to wipe out, say, poverty in 5 years, and enjoys an IPO that dwarfs Google's. At first, the investor assumption is that someone big, BuffetGatesClintonBraniff, has something in mind. When it turns out to be more like Soylent Green, the stock takes a pause, then skyrockets.

9/27/2006 9:26 PM  
Anonymous george said...

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Best Wishes

10/04/2006 10:09 AM  

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