I was initially long GEO and was not interested in CXW . GEO has great history of good runs after election cycles and has, in the past outperformed CXW . I changed my mind today, after being stopped out on my GEO long and noticing that CXW's chart was much less affected by Biden's action to order the Department of Justice to end its reliance on private prisons... Why I asked myself ??
So, short and sweet , here is what I found ...
1) GEO is 14% exposed to BOP vs. CXW at 3% from a revenue standpoint (probably biggest factor here)
2) CXW's Managed Only Beds account for 12% of its total bed capacity while this number is 30% for GEO .
( managed only meaning they do not own the real estate on these ones )
3) GEO is approximately twice as leveraged as CXW and CXW has already eliminated its dividend with plans to further de-leverage .
GEO will be hurt more than CXW by loss of federal contracts. CXW is nicer situated to outperform GEO going forward ...
How I plan to trade this :
I will take a long on CXW first as the technicals look nicer for long entry at this time. For the short on GEO , I plan to wait for a little more upside before shorting, I will wait for the next cycle up to short GEO . Equal position sizing in each.
I still have lots to learn with ratio trades, this is my first one I have decided to publish and it's only my point of view. So, please do additional research if you decide to enter yourself, just sharing a perspective here. :)
Constructive input is always appreciated and welcome too.
Good luck ~
So, short and sweet , here is what I found ...
1) GEO is 14% exposed to BOP vs. CXW at 3% from a revenue standpoint (probably biggest factor here)
2) CXW's Managed Only Beds account for 12% of its total bed capacity while this number is 30% for GEO .
( managed only meaning they do not own the real estate on these ones )
3) GEO is approximately twice as leveraged as CXW and CXW has already eliminated its dividend with plans to further de-leverage .
GEO will be hurt more than CXW by loss of federal contracts. CXW is nicer situated to outperform GEO going forward ...
How I plan to trade this :
I will take a long on CXW first as the technicals look nicer for long entry at this time. For the short on GEO , I plan to wait for a little more upside before shorting, I will wait for the next cycle up to short GEO . Equal position sizing in each.
I still have lots to learn with ratio trades, this is my first one I have decided to publish and it's only my point of view. So, please do additional research if you decide to enter yourself, just sharing a perspective here. :)
Constructive input is always appreciated and welcome too.
Good luck ~
Comment:
Clearly should be working at more of these kinds of beta hedges :) Especially if one is selling calls at the same time .
Comment:
This one was my first attempt but I am going to try some more as a separate strategy in the future with a dedicated account aimed at collecting options premiums while staying hedged
艾力克~