Wednesday brought a familiar post-election ritual: investors squinting at their screens, trying to figure out which sectors just got a new lease on life and which ones are about to get a stern talking-to from a new Congress. For-profit prison stocks landed firmly in the latter camp.
The results of Tuesday's midterm elections, which saw massive gains by the Democratic Party, sent several sectors lower as investors digested what majority control by the Democrats could mean for their holdings. For-profit prison companies The GEO Group (GEO) and CoreCivic (CXW) are among those getting hit.
Prison Stocks Get Hit
Both companies have benefited from the current White House. A look at their investor relations pages shows wins like this week's 10-year deal involving The GEO Group, the City of Big Spring, Texas, and U.S. Immigration and Customs Enforcement to reopen two idle immigration processing centers. The deal means $200 million in annual revenue for The GEO Group in its first year, the company said.
Deals like this have helped the financials for both companies and could explain why both stocks are up over 60% in the last year, outperforming the broader market.
President Donald Trump and the current Republican-majority Congress have sought increased funding for ICE, and part of that is going to increase the immigration facilities and beds needed as efforts are ramped up.
A Democratic-majority Congress is likely to push back against ICE as a priority and rein in the aggressive rounding up of immigrants. That could mean fewer deals for the prison companies in the future and potential re-negotiations on existing deals.
Donald Trump Owns Prison Stocks
Financial disclosures from earlier this year show Trump owns shares of both The GEO Group and CoreCivic. While it's not known exactly how much in each prison stock is currently owned by Trump, declines Wednesday could be hurting his stock portfolio.
Trump also owns defense stocks, which could be another area hurt by the election outcome.
Trump's team has told MarketDash in the past he does not manage his investments and does not know which stocks he owns.
Prison Stocks Fall
Geo Group shares were down 2.4% to $27.39 on Wednesday versus a 52-week trading range of $12.51 to $33.17.
Meanwhile, CoreCivic was 1.6% lower to $30.48 on Wednesday versus a 52-week trading range of $15.74 to $36.55.
