Following the victory of GOP candidate Donald Trump in the 2024 Presidential election, private prison stocks experienced a notable surge to the upside.
While these companies traded relatively flatly or even experienced stock price depreciation under the presidency of Joe Biden, Trump’s purported ‘tough on crime’ stance does present a boon for these businesses.
That stance, however, isn’t the main bullish catalyst — Trump’s proposed mass deportation plan is. The President-elect has at various times stated his intent to deport 15 million to 20 million illegal immigrants — even though the United States only has approximately 11.7 million undocumented persons per the Center for Migration Studies.
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For reference, the current prison population of the United States is approximately 1.9 million people, or roughly 0.5% of the total population, higher than even the incarceration rates of the notorious Soviet GULAG system. Trump’s plan would see a million deportations per year, estimated to cost at least $88 billion a year by the American Immigration Council.
Although the intent is to ultimately deport such persons to their country of origin, or even to countries they have no affiliation with, such an effort would require the use of — and expansion of detention facilities at an unprecedented scale. Private prison contractors are the ventures best positioned to provide that.
However, if he does follow through with his plans, these are the stocks that stand to see the biggest price increases.
Geo Group (NYSE: GEO)
As the preeminent private prison contractor in the United States, Geo Group (NYSE: GEO) would see the strongest tailwinds from the proposed mass deportation plan. It was also part of Michael Burry’s portfolio for quite some time — although the famed investor missed out on most of its recent gains.
The business designs, finances, develops, and ultimately manages detention centers and minimum security facilities. GEO stock has several distinct advantages — it maintains a 40% market share, and gets 49% of its revenue from federal agencies, per the company’s latest Form 8-K filing. Apart from building and managing facilities, the Geo Group also provides supervision, surveillance and electronic tracking.
On a year-to-date (YTD) basis, Geo Group stock has seen prices rise by 171.36%. A day before the election, GEO shares were trading at $14.18 — since then, they’ve risen to $29.20 by press time, equating to a 105.92% surge.
Corecivic Inc (NYSE: CXW)
Formerly known as the Corrections Corporation of America, Corecivic (NYSE: CXW) is Geo Group’s main competitor. It offers a similar suite of services, as well as leasing property and facilities to federal agencies.
At $2.5 billion, CXW stock has a smaller market cap than GEO’s $3.9 billion, as well as a smaller market share. Accordingly, the move to the upside was smaller, as investors are well aware of the role scale would play in the deportation plans.
CXW shares, which were trading at $13.19 on November 4, have since surged by 62.16% to $21.39. This latest development has brought YTD returns up to 48%. A possible reason for the lagging performance is the company’s ongoing legal dispute surrounding alleged civil rights violations in Tennessee.
Axon Enterprise (NASDAQ: AXON)
Both of the prior entries were ‘pure play’ prison stocks — but Axon Enterprise (NASDAQ: AXON) is not. Readers might be more familiar with the company’s former name — TASER International. While it does not stand to benefit directly from the proposed deportation plan, there’s a strong case to be made for it as a bullish catalyst for AXON stock.
Though some, like Tom Homan, the Trump administration’s border czar, are calling for and expecting ‘self-deportation’ on a massive scale, this remains an unlikely avenue. Arrests on the scale that is being proposed would require extensive action from law enforcement.
Taking into account the already present controversy surrounding the plans — which would likely only increase as they are set in motion, the use of less-lethal weapons to the fullest possible extent seems like a no-brainer. The business has also diversified to offer body cameras and computer-aided dispatch software in recent years.
At press time, AXON stock was trading at $691.1 — with YTD gains of 174.65%, of which 60.89% occurred since the presidential election.
Both the plans and the businesses poised to benefit are, of course, controversial — to boot, the President-elect has a history of overpromising and under-delivering on some of his campaign promises.
Featured image via Shutterstock
