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Private prison industry, private prison stocks, CXW, Corrections Corporation of America, GEO, Geo Group Inc.
During these trying times of uncertainty
America has the largest prison pop.

Released on Friday, December 16, 2011, 1:00 PM ET

Pittsburgh, PA (SpeculatingStocks) - During these trying times of uncertainty, one thing is for sure, America has the largest prison population in the world. With that being said let's face it the states are broke and our federal prisons are at 140% of their capacity.

Private-prison stocks are moving and often times investors are getting a better return than in technology, financial, manufacturing and telecoms. Barclays analyst Manav Patnaik states “the annual demand for new prison beds at 35,000, and the supply at just 20,000 public and private beds”. The reason for this deficit between supply and demand is that the states are broke so they cut prison budgets. This creates a tremendous opportunity for private prison systems and their shareholders.

Another benefit of this industry is that they really don't rely on intangibles: like weather, industry fluctuations, overseas reactions and performance is based solely on capacities. Cities used to do everything to keep prisons out. Today – they are in competition for jobs, tax revenue utility hookups and, pay per-inmate revenue. Cities are fighting to attract them!

Towns in Texas, North Carolina, and Colorado stampeded for new state private prisons and the benefits that come with them. It will be difficult to slow the momentum of private prisons, which have become a political force to be reckoned with, and offer great value for investors.

In closing; here is something to think about, half of the new inmates over the past year were sent to private prisons, even though less than 9% of U.S. prison beds are privatized. Private prison companies have been able to raise several billion dollars of investment capital both in the stock market and by borrowing from commercial banks and other lenders. Proponents of privatization argue that private prisons, through innovative design and management, and by realizing economies of scale, can lower the overall costs of incarceration.

Here are two companies to keep your eyes on:

Corrections Corporation of America (NYSE:CXW) - CXW owns and operates privatized correctional and detention facilities in the United States. CXW revenue has grown from $1.59 billion in 2008 to $1.62 billion in 2009 to $1.67 billion in 2010. Net income has also increased over this period.

Geo Group Inc. (NYSE:GEO) - This is a company trading at slightly over a $1 billion market cap. GEO provides government-outsourced services specializing in the management of correctional, detention, mental health, residential treatment, and re-entry facilities in the United States, Australia, South Africa, the United Kingdom and Canada. GEO has grown revenue from approx. $1.14 billion in 2010 to approx. $1.27 billion in 2011. GEO is now tradig near the bottom of its chart at around $17, with a 52-week low of $16.40.

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