A thoughtful person recently sent me an email with thoughtful observations on what the Trump era has meant for the private prison industry in the financial markets. I asked if I could post the musings, and I was allowed to put up this text under the byline "Anonymous." Enjoy:
Anyone remotely interested interested in criminal justice reform could hardly forget the immediate effect that President Trump’s law-and-order election had on the private prison industry. Almost immediately, there was an out with the old (Obama) and in with the new (Sessions) ideological shift that saw the value of these companies double in value (press report here). There was very little reason to hope that many reformer’s goal of banning private prisons would come to fruition.
Almost three years later, my life as an investor — along with the non-stop chatter about the S&P 500 at new all-time highs — had me curious to see what the performance of these stocks was since President Trump took over. My discovery was somewhat astonishing (although pleasantly so); GEO (GEO Group) and CXW (Core Civic Inc. — formerly Corrections Corporation of America) are now trading at Pre-Trump levels (prices that factored in a Hilary Clinton presidency and the potential banishing of the private prison industry as a whole). Coupled with the fact that this is happening notwithstanding the S&P 500 hitting an all-time high today and rallying 50% or so since Trump's election. Now when you factor in that these stocks doubled in the weeks following the election, they are actually down 50% since! That is EXTREME relative underperformance.
What does this all mean?
1. The major share holders of these stocks feel there is significant likelihood of a Democrat being elected in 2020 — so much so that they have ALREADY begun to dump their stocks a year early,
2. Trump’s policies are seriously emptying out the private prison through expedited deportations and/or decreasing of prison populations,
3. States have significantly begun to reduce its number of inmates (after all, there are far more state inmates than federal ones),
4. Nothing at all.
Just an interesting thought that intersects last week’s criminal justice forum and today’s new stock market highs.
One thing is for certain — President Trump has not done well for the private prison industry, and that’s just fine by me.
— Anonymous
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