Cárceles de máxima seguridad, accionistas de mínima

The privately-run prison industry has emerged as a lucrative investment in the United States, particularly under the presidency of Donald Trump. Despite the overall decline in crime rates in the country, the expansion of a punitive immigration policy has fueled a surge in detention centers. President Trump's return to the White House seemed to create new opportunities for investors, with promises of profitable ventures in areas such as national manufacturing, banking, cryptocurrencies, dietary supplements, defense contractors, and oil producers.

GEO Group and CoreCivic, two major players in this industry, manage around 165 detention facilities with a capacity for nearly 160,000 inmates. GEO shares surged by about 130% since November 2024, while CoreCivic shares rose nearly 160%, significantly outperforming the S&P 500 index and individual sector stocks commonly associated with Trump's administration.

Despite a decline in violent crimes and a record low homicide rate, the Immigration and Customs Enforcement (ICE) agency, expanded and empowered, keeps detention centers busy. Between 2016 and 2024, both GEO and CoreCivic increased their revenues by around 1% annually. For 2026, GEO's revenue is projected to grow by 24% compared to two years ago, reaching €2.57 billion, while CoreCivic's revenue is expected to surge by 38%.

GEO recently secured two new contracts with ICE worth €141 million annually, with CEO George Zoley hinting at the potential sale of some facilities to the agency. CoreCivic has already transferred four centers to the US government for €1.89 billion, funds that could be used to reduce debt or repurchase shares. The industry's success is tied to a president obsessed with detaining and deporting immigrants.

As this harsh approach harms the economy, future presidents may moderate such aggressive tactics. The prison industry also attracts unwanted attention, with recent deaths of immigrants in a GEO facility in Newark leading New Jersey to open a civil rights investigation and sue the company for blocking state health inspectors. After Kansas lawmakers pushed for restrictions on one of their facilities, CoreCivic sold it to the US government.

Allegations of abuse against detained immigrants have reignited mass protests, heightening risks for both GEO and CoreCivic. Both companies claim to prioritize the well-being of their inmates. Following former President Barack Obama's efforts to end the use of private facilities, a 2016 study concluded that outsourcing detention is cheaper, but the administration argued it is neither safer nor more cost-effective than federal-run centers.

With both GEO and CoreCivic trading at a premium to their medium-term EBITDA multiples, investors sit in positions of minimal security.