NEW YORK (TheStreet Ratings) -- The free market conservatives in Alabama, Arizona, Georgia and Florida must really love illegal immigrants.
Instead of subjecting undocumented workers to back breaking, minimum-wage work, new laws are being passed to provide free room and board for them within the prison system. With the trend toward privatization, every new illegal immigrant prisoner is now a potential source of corporate revenue.
The two public companies positioned to collect around $90 per day for each inmate housed are both 'Buy'-rated by TheStreet Ratings. Corrections Corporation of America (CXW) rated at B- and The GEO Group (GEO) rated at B, are leaders in the private prison industry.
On Thursday June 9, Alabama's governor Robert Bentley signed an immigration law, similar to those of Arizona and Georgia, to use state police to check the immigration status of drivers pulled over for traffic infractions. Until these laws are found unconstitutionaln they will push up the number of prison inmates.On Wednesday, June 1, The GEO Group announced a deal with the U.S. Immigration and Customs Enforcement (ICE) to house detainees at a 650-bed expansion to their existing facility bought from the city of Adelanto, California a year ago. GEO Group expects the facility to be full by August 2011 and build room for an additional 650 beds by 2012. To sweeten the deal, the company is guaranteed a 75% occupancy rate. At $42 million in expected revenue from the facility breaks even on renovation costs in less than three years. In Florida, Governor Rick Scott's recently passed budget also shifts some Florida prisons to private hands. Exchange-traded funds are the wrong way to play this privatization trend. Macquarie Global Infrastructure Total Return Fund (MGU), the most concentrated in Corrections Corp of America at 2.1%, is rated in the 'Sell' range as is First Trust Industrials AlphaDEX (FXR) holding just 1.2% CXW. Vanguard Small Cap Growth ETF (VBK) is ranked in the middle of the pack as a 'Hold' but contains just 0.3% of Corrections Corp of America. Three ETFs rated at 'Hold' own shares of The GEO Group. However, at a maximum stake of 0.6% of assets, iShares S&P Small Cap 600 Value (IJS), SPDR S&P 600 Small Cap Value ETF (SLYV), and iShares Morningstar Small Growth (JKK) hardly budge the investment outcome needle on movements in the underlying stock. Continue to focus on direct holdings of Corrections Corporation of America until the political winds shift. -- Reported by Kevin Baker in Jupiter, Fla.
For additional Investment Research check out our Ratings Research Center.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV