Thursday, March 5, 2009

3 prison stocks poised to break out {MORIAH CONQUERING WIND}

Posted in by Illuminated One | Edit
Company Focus
3 prison stocks poised to break out

Thanks in part to overcrowding, governments are turning to private companies to build and manage prisons. Here's how to pick the right time to buy into the trend.

By Michael Brush

In what might be a revealing commentary on our country's state of affairs, the nation's private prison companies look like solid investments for the next several years.

The three big prison companies -- Corrections Corp. of America (CXW, news, msgs), The Geo Group (GGI, news, msgs) and even the troubled Cornell Cos. (CRN, news, msgs) -- have decent growth prospects for the following reasons.

* Increased border patrols. The Intelligence Reform and Terrorism Prevention Act of 2004, signed by the president in December, calls for stepped up border patrols to improve domestic security. This makes it likely that more illegal immigrants will be caught. Lawmakers estimate that by 2010 the Bureau of Immigration and Customs Enforcement (ICE) will need another 40,000 prison "beds," as they say in the business.

* Governments are hard up for cash. "Because of tight budgets, there has not been a lot of new prison construction," says Irving Lingo, Corrections Corp. of America's finance chief. Instead, state and federal prison systems turn to private companies that build and manage prisons. In the 2005 federal budget, for example, Congress cut prison construction spending by 48%, says Patrick Swindle, an analyst who covers the sector for the brokerage Avondale Partners. Government prison systems turn to the private sector in part because costs are 10% to 15% lower.