*CoreCivic, Inc. (CXW)
CoreCivic is the largest private owner/operator of corrections and detention facilities in the country, with over 70,000 beds in 47 facilities, as well as 26 residential reentry centers and 15 other properties.
While CoreCivic has historically generated steady profits, it is increasingly controversial. A class-action lawsuit alleging misleading statements by the company (then named Corrections Corporation of America) in 2016 remains a cloud. President Biden’s executive order on January 26 banning the Department of Justice from renewing private prison contracts capped years of earlier steps in that direction, threatening at least 23% of CoreCivic’s revenues. Adding to its difficulties, the pandemic has led to reductions in its population.
As a real estate investment trust, Core Civic required capital market access to fund its growth, but skeptical investors constrained this access. In response, the company converted to a taxable corporation in January. The shares have declined 80% from their 2014 peak and trade at long-time lows.
However, at least one savvy investor, Michael Burry, of Scion Asset Management and The Big Short fame, raised his position to 1% of the company’s market cap. What he may see is that CoreCivic appears sharply undervalued on a per-bed asset basis, there may not be many alternative locations for federal incarcerations, and the company is aggressively shoring up its balance sheet. CXW shares carry considerable risk and social taint but appear to offer sharp upside potential if conditions turn in the company’s favor.
Bruce Kaser, Cabot Turnaround Letter, cabotwealth.com, 978-745-5532, May 26, 2021
*Bunge Limited (BG)
Bunge operates through five segments: agribusiness, edible oil products, milling products, fertilizer, and sugar and bioenergy. And we’re interested in all five because they’ve all got some serious catalysts coming down the pike.
In its most recent quarter, the company posted results more than 100% higher than analysts were expecting.
Price appreciation is likely only going to gain steam as the Fed tries to ride the line between spurring runaway inflation and causing a market correction. The major players have signaled that neither spending nor easing is going away soon.
And that’s a perfect storm for inflation to sneak up and bite them in the you-know-what. So. before things get too much more out of hand, we need to position ourselves in a stock that should benefit from whatever the next few months and years have in store.
Bunge provides products people use every day and need to survive. That’s not something you stop buying because it gets a little more expensive. So as inflation grows, so will Bunge’s profits.
And if we’re wrong and inflation remains in check, Bunge will still be a profitable company providing products everyone needs. And it’ll still pay out a nice quarterly distribution to cushion our accounts with income.
Bunge Limited is a buy under $95. The 12-month target will start at $125.
Jason Williams, The Wealth Advisory, www.angelpub.com, 877-303-4529, May 2021