As we approach the 2024 U.S. presidential election, investors are watching two stocks that could quickly transition from strong performers to home runs. These potential winners are both in the private prison sector and were once the favorite holdings of hedge fund manager Michael Burry. The two private prisons are GEO Group (NYSE:GEO) and CoreCivic (NYSE:CXW), and they have been the subject of much speculation.
Don't Miss Our Christmas Offers:
- Discover the latest stocks recommended by top Wall Street analysts, all in one place with Analyst Top Stocks
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Both companies have received “Strong Buy” ratings from analysts and have been identified as stocks with significant upside potential. However, the outcome of the presidential election could play a crucial role in determining the future performance of these stocks.
Presidential Elections’ Impact on Prison Stocks
The U.S. presidential elections trigger changes in industry potential as major candidates’ competing priorities and expectations about the winning candidate evolve. This sets the tone for market activity. This is particularly true for stocks most affected by regulation or government contracts, with companies managing private prisons ranking high on this list.
For instance, both GEO Group and CoreCivic have been subject to fluctuations in demand for their services, depending on the policies of the government in power.
Republican Effect on Private Prison Stocks
Following the election of President Trump in November 2016, GEO Group and CoreCivic saw their stock prices soar as the new administration reversed Obama-era policies that had been unfavorable to the private prison industry. A similar scenario could play out in 2024 if the Republicans manage to win the White House.
Democrat Effect on Private Prison Stocks
Furthermore, an executive order issued by President Biden in January 2021 prohibited the use of private prisons for the federal prison system. This order has had a negative impact on companies like GEO Group and CoreCivic.
However, a Republican victory in the 2024 election could lead to a reversal of this executive order, which can result in a more favorable policy environment for the private prison industry, likely causing a surge in the stock prices of these companies.
Government Policies Aren’t the Only Factor Affecting Prison Profits
In addition to the potential policy changes, there are other factors that could drive the performance of GEO Group and CoreCivic. For example, both companies have a strong track record of managing correctional facilities and providing other services to government agencies. This could make them attractive investments, regardless of the political climate.
However, it is important to note that investing where there is volatility expected, including private prison stocks, carries the risk associated with this volatility. Both companies in recent years have faced much public scrutiny and always seem to face potential regulatory changes that could help or hurt their business models.
Investors can keep up with what Wall Street analysts anticipate by examining potential investments using TipRanks‘ analysis and data tools. This helps one make wiser investment decisions.
For example, using the TipRanks Comparison Tool, we can observe that both stocks have a Smart Score above five. This unique score evaluates stocks based on eight key factors, indicating their potential to outperform the market. A Smart Score above five suggests that the stock is more likely to outperform the market. Specifically, both GEO and CXW stocks have Smart Scores of nine and seven, respectively. Additionally, both have received a Strong Buy rating from analysts.
Investor Takeaway
The upcoming presidential election in 2024 could have a significant impact on the private prison industry. If the Republicans manage to win the White House, we can expect a reversal of the executive order banning the use of private prisons for the federal prison system.
This would likely lead to a surge in the stock prices of GEO Group and CoreCivic, making them attractive investments for those looking to capitalize on a potential political shift.
