Making bank on the border

CNN Money just published an article called “Wall Street bets on prison growth from border crisis.”  Given the source, I understand that the perspective will be financial and how investors can make money, but this piece floored me (and depressed me) in its tone-deafness and willingness to cheer the rise of private prisons.  Here are some of the standout lines:

There’s a crisis on the U.S.-Mexico border, and Wall Street is betting that it will result in a boom for private prisons.

Geo Group (GEO)and Corrections Corporation of America (CXW) are two of America’s largest for-profit prison operators. They have thousands of open beds, and they have deep relationships with the federal agencies charged with doling out contracts to house undocumented immigrants, including children.

“It’s highly likely that the federal government will have to turn to the private sector for help with this crisis. Both companies are extremely well positioned,” said Brian Ruttenbur, an analyst at CRT Capital Group who covers the stocks of Geo Group and Corrections Corporation of America (CCA).

Investors are clearly seeing dollar signs. Shares of both CCA and Geo Group have spiked since the border crisis landed on front pages this summer. CCA has climbed 8.5% since July 30, and Geo Group is up over 7%. That’s a lot better than the S&P 500’s 1.5% advance over that time span. “Investors see this as an opportunity. This is a potentially untapped market that will have very strong demand,” said Alex Friedmann, an activist investor who owns shares of both CCA and Geo Group.

The article then admits that the growth of private prisons might be controversial, but quickly turns positive again, noting that:

“investors are attracted to prison stocks because they give generate lots of cash flow, have strong dividend yields and high occupancy rates compared to other real estate options.”