Prison Stocks Break Out

Fashionistas have always maintained that stripes are slimming, yet investors have been fattening up on the publicly traded prison operators over the past few weeks. Corrections Corporation of America (CXW) and The Geo Group (GEO) have been absolutely en fuego as privatization efforts gain traction and new contract awards are handed down.  Indeed, the Terminator himself, Governor Arnold of California is behind much of the recent excitement in the sector as he ships off prisoners to far away states with really shitty weather. California awards 2 out-of-state prison contracts (Yahoo Finance)

The financial model of prisons is similar to the hotel industry, with earnings estimates driven by a RevPar model or revenue per available room, a relatively straightforward calculation that in theory lends some earnings predictability to these companies. After all, many of the customers check in for 10- to life...and with short interest on these names ticking up slightly over the past few months, no doubt some folks on Wall Street are walking a little funny as the stocks catch a bid.

That’s gotta hurt

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