NAK1987

GEO , Long opportunity with potential for 100% + gain

Long
NYSE:GEO   Geo Group Inc (The) REIT
GEO recently dropped around 25% , in my opinion mostly due to Biden statements about removing private prisons from government contracts during his term. I don't believe this will actually happen , especially taking into account the current divided government in the US (harder for Biden to pass bills).

What stands out to me with GEO is that it only recently underwent a pretty substantial news based drop and is trading at what I believe to be a discount (current P/E also less than share price). More importantly , after pretty much every election this stock rallies over 100% , I encourage you all to go back on trading view to see this for yourself . I believe we will see a similar 100% + rally with GEO in the next 4-6 months .

In addition to that , they also pay a 16% dividend and I like their revenue/income trends . They do have some slightly higher comparative debt/equity figures but due to the nature of their business model, they have the benefit of consistent income sources and will have no issues paying debt .

The one Analyst 12 month target available is $15 . I see greater upside, personally .

I have marked the chart with the prior 3 elections to demonstrate that GEO typically undergoes a rally post election.

Good luck ~
Trade closed: stop reached: Stopped out today . I am going to watch this one from the sidelines for now ... maybe if it drops to a new low and consolidates ill re-enter , but for now i'll play it safe . Lots of other opportunities .
Comment: When this idea was published, I was hoping that democrats would not win majority of senate, but they did , Today Biden announced/(reminded us) they will not renew private prison contracts, now they have a little more power to see the bills through though . Although GEO has diversified fairly well, is not completely dependent on its prisons alone and has contracts that extend past even a two term Biden presidency.... I still would like to research who is better positioned for a loss of prison related income going forward. My initial research shows me that it seems to be CXW, which is a similar company and competition to GEO. If I find that CXW is better positioned for a loss of prison revenue and is indeed less dependent on these contracts than I may consider a hedge trade on the two CXW/GEO. I am going to research this more and provide an update later or perhaps a new idea if I decide to give the trade a shot .

Comments

Yeah, I agree, hoping for another drop due to the negative sentiment towards it for an even juicier dividend and value at 7.2. Private prisons wont go away, just empty promises from politicians. As population increases and more hardships from the recession, GEO will be needed more than ever, a great contrarian play imo.
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NAK1987 gNnairdA
@gNnairdA, We might just see it with the right news as a catalyst , thanks for your comment and good luck .
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NAK1987 NAK1987
@NAK1987, good call on that drop you forecast :)
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NAK1987 gNnairdA
@gNnairdA, Good call on that drop you forecast for GEO, I was stopped out today so I am going to watch it for another potential drop with some consolidation to consider a re-entry . Also , their competitors, CXW, may actually be better positioned as I was reading today their federal prisons bureau contracts is less than 2% of revenue , I dont know what GEO's is but I am assuming it must be more based on today's move .

That being said, I am going to research a hedge trade CXW/GEO ( short GEO , long CXW ) . More research needed first but I have a feeling that if GEO is more dependant on its prison revenue then CXW may outperform going forward.
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gNnairdA NAK1987
@NAK1987, Thanks! Sorry about your loss With the bad news today it will be interesting in investing in these with the thesis of the government simply buying /renting their buildings and changing management as I'd imagine moving all those prisoners and building an entirely new facility would not be feasible. Both tickers look attractive from a value perspective, but the downtrend is so strong for both are so strong It's really hard to say when sentiment is going to change, but I will be watching it very closely if there is a breakout or a bounce of support in these wedges they are forming.
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NAK1987 gNnairdA
@gNnairdA, Yea , thanks for saying that , loss is part of the game sometimes as you know . I am pretty used to stops being hit. I am usually trying for a 60% to 66% BA and a win/loss ratio over 1, so some loss is expected. Sometimes, even if the BA happens to be less some months , I find that keeping that win/loss ratio over 1 and respecting responsible position sizing is the key to a profitable account .

In regards to GEO, I did another trading view publication today on a CXW/GEO hedge where CXW is long and GEO is short. Worth a read . It seems like a good setup to me. I think CXW has had a little more foresight and has prepared better for the coming political horizon. I think CXW will out-preform GEO .

Whichever way you decide on , good luck to you and thanks for your input.
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Great comments. I own 100 shares already. I might pick up another 100. I didn't realize the div. yield had gotten so high. Thanks!
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NAK1987 Dougbneal
@Dougbneal, Thank you sir , good luck .
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Good luck
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NAK1987 Saeed966
@Saeed966, Thank you , you as well .
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