Shares of prison operators CoreCivic (NYSE: CXW) and The GEO Group (NYSE: GEO) rose 11% and 12%, respectively, in early trading on Jan. 27. That said, both stocks are off dramatically over the past year. There's a connection here.
Both CoreCivic and The GEO Group do something that the government could, and often does, do itself: operating prisons. Hiring private companies to do this work has come under increasing scrutiny, pushing the shares of these companies notably lower over the past year. CoreCivic's stock is down 57% and The GEO Group is off by 48% over that span. The concern isn't unreasonable, noting that The GEO Group has lost two government contracts in three months. But the biggest fear of late has been that the new administration in Washington D.C. would act to curtail the outsourcing of the U.S. jail system.
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Why CoreCivic and the GEO Group Both Rallied Over 10% Today