CXW - CoreCivic

[johnny]

I haven't actually don't any research here, but it is an idea that I think is superficially interesting.

 

The DOJ announced that they're going to transition away from the use of private prison management. This has caused these stocks to crater. CXW specifically went down about 40%, even though the contracts covered by the announcement only make up 7% of revenue.

 

I think the nightmare scenario here is that some sort of precedent has been set and that the future of private prisoning is over. I've read the DOJ report and I have to say that the overall picture is quite unclear. They find that all sorts of "bad things" happen more per-head at private prisons. One example is that private prisons had a much higher cell-phone confiscation rate (cell phones are contraband in prison and need to generally be smuggled in). This is a particularly bizarre observation to hold against private prisons, since of course increased confiscation rates can imply either much more smuggling OR much more effective enforcement. Whatever.

 

Anyway, politics aside, here is the hunch I have. To whatever extent agencies move away from the use of private prison ~management~ (this is where the bad stuff happens, supposedly), they're still going to need physical prisons to store their prisoners in. CXW owns most of its prisons. So it seems to me the final outcome even in this relatively bad case is that CXW ends up selling or leasing a vastly higher proportion of its properties than it currently does, and gracefully exits the management game. So what would that look like?

 

The closest CXW facility to me is in California City. It was built in 1999 for a little under $130m. Its current carrying value is $93M. It has about 2300 beds. It was originally used by the BOP in fact! But that ended, it went to ICE, sat vacant a while, and ended up being leased by the California prison system (CDCR). This is a lease of the facility; CXW doesn't manage the property at all. The price? $28.5M a year.

 

I guess the question now is to what extent the outcome for the California City facility is representative or outlier. If this is a generally duplicable process, where the cap rate on their property is 30% -and- they are completely in the clear politically, this could be something worthwhile.

 

Sorry for posting this thread having done no work, but I really just was hoping to hear anyone's thoughts to see if there's something obvious that I'm missing.

[Guest Schwab711]

I'm in the same boat, I've probably done less work than you. I also think this is an interesting opportunity. Investors should get ~50% of funds back through dividends before the new policy hits them. I passed for the moment for a few reasons. It would be great to hear why I'm wrong or overly concerned about risk.

 

1. The national trend is moving towards marijuana legalization and reducing sentences or avoiding prison for first offences on harder drugs. There are 4 states with legal recreational weed and 6 voting on it within the year (iirc). There are another 5-15 states that may move to vote on the topic by 2018 elections. This could be a huge hit to prison/jail demand as roughly 60% on inmates are in for drug-related crimes. I believe the % are higher at state prisons. This is a huge secular trend that could drastically reduce the value of these properties and it no longer seems so theoretical.

 

2. I'm not sure I agree with the referenced study's conclusion but it's debateable whether there's any savings from private prisons either way. Of there is no cost benefit then states become incentivized to take over the prisons for control and liability reasons, in my opinion. While CXW would be compensated, I think this is another material risk.

 

3. If the stories and studies are true, there could be substantial legal liabilities down the line. Maybe someone could correct me if wrong, but there's seems to be a broad push for prisoner rights and rectifying correction-related injustices (inmate abuse, sub-standard care/safety, ect). This could be $mm/inmate.

 

There was ultimately too much risk and negative secular trends for me at the moment. I hope to keep researching the name. Hopefully I'm wrong and there's $ to be made.

[glorysk87]

This is one that I wouldn't touch. Ethics aside, I think the business model is terminal. Reasons why follow:

 

1) Number of beds has been steadily declining for years. Prison population has done nothing but sink since 2009.  As population continues to fall, contracts fall into non-renewal. In their "owned" facilities, occupancy (which, btw, is an incredibly distasteful metric to use for humans who are being imprisoned...) has fallen from 88% to 71%. This number is not going to get better.

 

2) There is essentially no alternate use for the properties.  Once a contract is cancelled, those properties are cash pits. They can't be leased out to other tenants, they can't be sold, they're just black holes.

 

3) Dividends don't appear to be sustainable.  Costs are largely fixed, meaning there's significant operating leverage in the business. This leverage cuts both ways, and severely curtails cash flow when performance is weak.  Additionally, FFO/AFFO appear to be inflated. Maintenance CapEx looks understated. If you "true up" their FFO/AFFO figures, the payout ratio becomes untenable.

 

4) Their contracts are almost all short duration.  The large majority expire within the next 2 years, and many within the next year.

 

5) They've given counterparties the option to purchase a subgroup of their facilities at or below book value.  The company itself trades at almost 3x book.  20% of that "stated" book value is represented by facilities with those options on them, which rationally should be capped at their option value (at or below book).  This implies that they're trading significantly higher than 3x book.

 

Aside from all of the issues above - the ethics of investing here are questionable. It's up to each individual person. There's not much that I won't invest in, but for-profit prison operators are one of them.  These are companies that have lobbied to have people put in prison for non-violent and honestly ridiculous offenses so that their contracts are secured, and then they treat them like garbage in order to juice profit margins.

 

Dunno. I thought this company was a short before hearing of the legislation. Now I think it's even more so.

[Mephistopheles]

 

They've given counterparties the option to purchase a subgroup of their facilities at or below book value.  The company itself trades at almost 3x book.  20% of that "stated" book value is represented by facilities with those options on them, which rationally should be capped at their option value (at or below book).  This implies that they're trading significantly higher than 3x book.

 

 

Market cap is $2.2 billion over a shareholder equity of $1.4 billion...so it's more like 1.6x book.

[johnny]

Yeah, maybe I missed it when I was cruising through the 10-K, but I don't remember seeing a thorough disclosure on the purchase options, which was concerning. I'm not as worried as you about the short-duration contracts, but that is probably because I am much more pessimistic about the long-term prisoner population. The CDCR/California City contract was a three year that expired this year and just got renewed. But California is a special case; I assume that the state had their hand forced by the Plata overcrowding lawsuit.

 

To flesh out something I guess I should defend (Schwab, this is a response to your third point), I don't have much hope that there will be substantial long-term declines in the prison population. The idea that drug law relaxation will produce this effect is, I think, a popular myth among the legalization advocates (a group I consider myself a member of). Most people in prison for "drug related offenses" are not mere drug users, but people involved in manufacturing, distribution, and all of the associated Breaking Baddery that goes with it. No amount of drug legalization is going to keep those guys out of trouble. Just like the cartel infrastructure that used to be devoted to marijuana got rapidly repurposed for fentanyl trafficking, most people in prison today for drug crimes are going to most likely end up in prison for non-drug crimes in an alternate libertarian universe.

 

 

Aside from all of the issues above - the ethics of investing here are questionable. It's up to each individual person. There's not much that I won't invest in, but for-profit prison operators are one of them.  These are companies that have lobbied to have people put in prison for non-violent and honestly ridiculous offenses so that their contracts are secured, and then they treat them like garbage in order to juice profit margins.

 

I used to be pretty into this stuff and have a pet peeve about the exclusive political focus on "for-profit" prisons as if they are substantially worse than public prisons. Public prisons at the state level create the exact same incentives and produce the same bad outcomes, but do so under the more politically protected guise of public employee unions. The history of the CCPOA is notorious (among the 20 people that care). They built up such a war chest that they could destroy any of the rural DAs that decided to listen to prisoner abuse claims. Some insane things happened in the 1990s and 2000s in California prisons that essentially nobody knows or cares about. Gladiator fights, etc.

 

But it is a gross industry to be sure. It reminds me of when I was trying to value Lorillard. I was reading through some medical literature about changes in smoking rates for various groups, and at some point I encountered a sentence that went something like, "Smoking rates among black pre-teens have declined..." and my first thought was "well that sucks". Sort of jolted me awake and I moved on.

 

Then they got acquired :(

[Foreign Tuffett]

I don't see this as a particularly good investment at the current price.

 

I suspect they may have trouble sustaining the current dividend payout next year as (1) the sweetheart deal they have with ICE for the South Texas Family Residential Center is currently being renegotiated. This single facility is a big chunk of their revenue and is likely very profitable (2) the Justice Department memo that caused the big stock price decline signals that the 7% of their revenue from the federal BOP is in terminal decline (3) California is making more progress towards reducing prison overcrowding, thereby cutting down on their need for CCA's private out of state facilities.

 

Also there's the absolutely horrible optics of the recent Mother Jones undercover investigation, along with the fact that HRC wants to "ban" private prison companies and isn't accepting campaign contributions from them.

[Spekulatius]

I don't see this as a particularly good investment at the current price.

 

I suspect they may have trouble sustaining the current dividend payout next year as (1) the sweetheart deal they have with ICE for the South Texas Family Residential Center is currently being renegotiated. This single facility is a big chunk of their revenue and is likely very profitable (2) the Justice Department memo that caused the big stock price decline signals that the 7% of their revenue from the federal BOP is in terminal decline (3) California is making more progress towards reducing prison overcrowding, thereby cutting down on their need for CCA's private out of state facilities.

 

Also there's the absolutely horrible optics of the recent Mother Jones undercover investigation, along with the fact that HRC wants to "ban" private prison companies and isn't accepting campaign contributions from them.

 

With prison population shrinking, and these private prisons basically being overflow facilities, I can see this business shrinking very quickly and permanently. I don't think CXW s a value investment at this point.

[johnny]

the sweetheart deal they have with ICE for the South Texas Family Residential Center is currently being renegotiated. This single facility is a big chunk of their revenue and is likely very profitable

 

Yeah. This, plus the California City deal are so insane that I get the feeling like 80% of their properties must be barely earning their cost of capital, with the entire operation being kept okay-looking because in a few instances they were able to sell water in the middle of the desert at a ridiculous markup. It's also quite surprising to see just how much money they burn through when the facilities sit idle. I guess it isn't -that- surprising when you think about the total size of the things, but it's tempting to go into the analysis just assuming that giant concrete squares shouldn't be too expensive to keep square.

 

A bit more background on the California City facility makes it clear that it's a terrible comp. The deal closed a few months before a hard-date where California absolutely -had- to meet an overcapacity target (they had appealed all the way to SCOTUS and lost). The contract was just renewed, but it's hard for me to see this contract existing in substantially the same form, say, 15 years down the line. My feeling is that there aren't really -huge- political barriers to prison construction. CCPOA jobs are massive windfalls for whatever rural county a prison gets dropped into, so if anything I'd guess the political barrier to construction is actually communities fighting over who gets it.

 

It's a tough business to analyze because every state's situation is different; but what I know about California makes me not to impressed with their long-term position in the state. Disappointed there isn't any bullishness here to push back on though.

[johnny]

Was just looking at this company and wondering if there was already a COBF thread on it. Disturbed at what I discovered. My Memento-style body tattoos are failing to do their job.

 

So, the stock is finally below where we were yapping about it four years ago, making all of us geniuses for not buying it back then.

 

Current valuation is about $1.4b, around $3.9b EV. For that you get around 65,000₁ owned beds, and some other stuff they're doing to "diversify".

 

For now, assigning zero value to anything that isn't owned beds, today's price is around $60,000 per bed. That's definitely well below the cost to build. They give an estimate at $200k/bed. Not sure I buy that, but I've never seen anything under $80k (wrong: their newest build was in Kansas, $155m for 2,432 beds--only $63,700/each). So there's some margin there, especially if you're evolving into a gold-bug inflation psycho like me. They have 2.4m square feet of offices that they lease out. Let's assume thats worth about $200 a square foot. That helps us wack $500m off of the EV, giving us a remaining valuation of $52,000 per bed. $200/ft is pretty conservative I'd say, but I'm not comfortable assuming a lease where the government is the counterparty represents reality.

 

The CEO seems to be willing to talk in similarly pessimistic terms about the valuation of the company (making the case that even if the model is politically unviable, they should be able to successfully sell/lease the properties to the govts at well above market implied values).

 

Ultimately just a question of where you think prisoner numbers are actually heading--I haven't been doing any homework on that in the past ten years. But this thing is trading at a 15% dividend and 20% FFO yield. Most other REITs trading like this are doing so because, while their assets are looking great in 2030, they may go bankrupt this year. It is interesting to contemplate a REIT with sort of the exact inversion of this profile.

 

Seriously considering a position here. Anybody on the forum want to save me?

 

 

1. As mentioned above, some of their leased properties give buy options to the government counterparty, often at a pretty below-build price. Optioned properties account for 18.6% of 2019 revenues.

[Maple Fun]

My concerns: their properties are mostly single-purposed while other RIETs can redevelop their sites. Counterparty risk at CXW is also too huge. 

[Foreign Tuffett]

At least 50% of the political spectrum hates these guys with the force of 10,000 suns, and the big banks won't even work with them anymore.* Even if Trump is reelected, in the long term these guys definitely look to be on the wrong side of "history" in the Hegelian sense of the term.

 

All that said, isn't the endgame for CXW, at least for their assets that operate for federal agencies, to stop being an operator and become more of a landlord like their state prison that just opened up in Kansas? ICE and the USMS were a combined ~46% of revenue last year. Both agencies seem to have no interest in actually owning and operating their own....[clears throat] "detainee capacity", possibly because doing so is a no-win scenario shitstorm. So we have a situation in which the agencies themselves probably want to continue to outsource this function, but political pressure means that this may not be feasible over an extended period of time.

 

A closely related issue is that most Democrats want ICE* to stop detaining so many people. This would reduce the demand for CXW's service. The "South Texas Family Residential Center", which a much younger me mentioned earlier in this thread, still accounted for close to 10% of revenue last year ($191.1 / $1981). It remains highly controversial. What kind of multiple would you put on an asset like this? To answer my own question: "Not a very high one."

 

Finally, as "Maple Fun" mentions, the assets are single use, so very long periods of vacancy are possible. Per Q4 presentation, they have three sizable facilities that have been idle for a decade!   

 

 

* https://www.cnbc.com/2020/01/02/why-private-prisons-geo-group-and-corecivic-are-struggling-under-trump.html

 

* CXW Q4 2019 presentation: "ICE: ~95% of detainee capacity is outsourced"

                                            "USMS: ~80% of detainee capacity is outsourced"

 

* Or "the agency formerly known as ICE" if it ends up being abolished and reconstituted as some have advocated for

 

 

[johnny]

Both agencies seem to have no interest in actually owning and operating their own....[clears throat] "detainee capacity", possibly because doing so is a no-win scenario shitstorm. So we have a situation in which the agencies themselves probably want to continue to outsource this function, but political pressure means that this may not be feasible over an extended period of time.

 

Yeah, doesn't that make it exciting? What are all the outcomes here? Either they keep using private prison Cos and kicking the can down the road (even the Obama memo really seemed to be setting up that sort of "all deliberate speed" ambiguity on the timelin), or they finally take ownership of the facilities, or they....stop enforcing federal laws??

 

Obviously the worst solution for CXW is also the stupidest: federal agencies decide they need to own and operate, but spend 5 years building their own facilities where perfectly servicable ones already exist. I just feel like I'm missing something here...the endgame seems pretty obvious to me.

 

A closely related issue is that most Democrats want ICE* to stop detaining so many people. This would reduce the demand for CXW's service. The "South Texas Family Residential Center", which a much younger me mentioned earlier in this thread, still accounted for close to 10% of revenue last year ($191.1 / $1981). It remains highly controversial. What kind of multiple would you put on an asset like this? To answer my own question: "Not a very high one."

 

Yeah, I'd heavily discount ICE contracts. That seems like a perfect storm of variables that will be unlikely to duplicate: an incumbent president who really DGAF, and a serious miscommunication/misunderstanding of policy on the part of Aspiring Americans. Obviously any normal administration is going to necessarily be a lot "softer" on this issue and less detention-happy. But again, the question is how many beds does the country need for its purposes, long term, and are we in an oversupply condition. I don't ask this rhetorically, I just think it's The Question.

 

 

Finally, as "Maple Fun" mentions, the assets are single use, so very long periods of vacancy are possible. Per Q4 presentation, they have three sizable facilities that have been idle for a decade!

 

Have they considered Dave and Busters?

[Foreign Tuffett]

Yeah, I'd heavily discount ICE contracts. That seems like a perfect storm of variables that will be unlikely to duplicate: an incumbent president who really DGAF, and a serious miscommunication/misunderstanding of policy on the part of Aspiring Americans. Obviously any normal administration is going to necessarily be a lot "softer" on this issue and less detention-happy. But again, the question is how many beds does the country need for its purposes, long term, and are we in an oversupply condition. I don't ask this rhetorically, I just think it's The Question.

 

Given that the ICE contracts are the lifeblood of this company, I agree. That said, questions of supply-and-demand in this case aren't really economic questions, they are largely policy questions. I don't have a strong opinion* about what future policies will look like...speculating on who will win the election in November and/or the future direction of Congressional immigration legislation aren't things I'm very interested in doing.

 

* It wouldn't surprise me if the status quo continued for years, but it also wouldn't surprise me if four years from now ICE has purchased or leased 35% of the CXW beds it is currently utilizing, with the other 65% being dormant.

 

 

[shhughes1116]

I have a long position, just to make my bias clear here.

 

Not sure how many of you are familiar with the Lorton Correctional Facility.  It was run by the District of Columbia, and closed down in 2001 for a variety of reasons, including overcrowding, proximity to residential areas, and the fact that it was just an old prison.  The closing was delayed by the length of time it took to find beds at Federal Bureau of Prisons facilities. 

 

Parchman is another example, in Mississippi.  There have been a slew of deaths recently, and the prison is ancient, built in 1901.  Do you think Mississippi has the funds to build a new prison to reduce over crowding at Parchman?  Not a chance.  And the resultant lawsuits from the recent prisoner deaths will likely see MS compelled to send prisoners elsewhere. 

 

Alabama might be the one state looking to build new prisons, and after COVID-19 blows a hole in their state budget, do you think they are going to have the funds and debt capacity to build a billion dollars worth of prisons?

 

The prison population may decline in the coming decade, but I think the number of beds at state-owned and operated prisons will decline faster.  These prisons are aging, many are overcrowded, and it is hard to justify a bunch of Capex in the state budget for a new prison, assuming you can find the raw land to build it on.  They are going to have to put these prisoners somewhere.  And on top of that, it makes for better PR to contract it out, and then throw the contractor under the bus when there is a problem.

 

I don’t think the ICE contracts are going away.  I think future presidents would rather pay for excess bed capacity than run the small risk of children and families crowded into cellS. 

 

I don’t think CXV is going be a growth stock.  But I think the concern over their earnings is overdone.

 

 

 

 

[Foreign Tuffett]

Very rough going so far this year for CXW. COVID + BLM protests have sent the secular trend towards less imprisonment into overdrive, Biden is ahead in the polls, ICE detainees are probably down, etc.

 

Dividend is gone:

 

http://ir.corecivic.com/news-releases/news-release-details/corecivic-suspends-quarterly-dividend-while-it-evaluates

 

 

Any thoughts on why CXW is aggressively moving away from some of its long-tenured management agreements?

 

https://www.wsmv.com/news/corecivic-intends-to-split-from-nashville/article_15bb3068-bff9-11ea-b4f2-8f783c29283b.html

 

https://www.wrcbtv.com/story/42345919/corecivic-terminating-contract-with-hamilton-county-citing-safety-concerns-at-silverdale-detention-center

 

https://www.stwnewspress.com/news/cushing-prepares-as-dept-of-corrections-cancels-prison-contract/article_ddc91f00-c89d-11ea-9214-2fdd0aa75099.html

[johnny]

Maybe the assessment in Nashville is this: if it's a marginal economic contract (they claim it's loss-making...I'd love to see them address that claim in a Q&A with investors lol), why should they sit around for 3 years, losing money, while their counterparty gets their ducks in a row to replace them (all the while attacking them in the press)?

 

This is, as has been noted, a company that is totally sensitive to not just policy but politics. They can't just let themselves get the shit kicked out of them for sport. But they don't have many levers to pull. This is maybe the only plausible offense they have: the tactical retreat.

 

If they can credibly signal to other counterparties something like "if you take the cheap bait and start attacking us in the press, we will leave immediately and let you deal with the disaster", it's definitely worth losing a few contracts for the effort.

 

The other cases are a bit different (Hamilton County seems like a normal contract dispute). But those are my thoughts.

 

I'd say the political developments in the past few months are clearly quite negative for the company. Biden will surely reaffirm the Obama-era guidance on private prisons, and VP Kamala will perpetually need to buff up her "Not a Cop" bonafides by finding uncharismatic Criminal Justice Totems to beat the shit out of on the national stage.

[Cigarbutt]

Maybe this is not an investment to be 'proud' of when acquaintances share their holdings list but this is worth sharing on an anonymous board.

 

At some point, the low price (today's equity market cap of 708M) may reach a point where future outcome makes sense. The share price below 6 was met last around 2001-2, in the midst of a restructuring, when revenues were 50% lower and share count (adjusted for splits) was about 10% lower. There are obvious ideological headwinds which may become more actionable in the short term.

 

3 scenarios:

1-Covid is a simple bump in the road (correction and detention process slowed down) and the private arm of the 'industry' recovers. Unlikely.

2a-Demand goes down to some degree but poor supply dynamics (public prison infrastructure is very old) are realized over time and CXW retains, through various arrangements, an interest in joint ventures or completely outsourced options. The recently completed Kansas project is interesting. Public (federal, state and local) entities are likely to be budget-constrained for a while. Even if the "correction and detention" budget constitutes only a small percentage of overall budget, there will be pressures to prevent contraction in other areas.

2b-Somehow, public entities take over the private options. This provides some kind of floor which IMO is reasonable when considering today's total enterprise value versus replacement costs. This is unlikely to happen rapidly even if it is meant to happen so there would be an opportunity to adapt and to sell properties at OK prices.

 

They have a high debt versus various cash flow projections which may reduce flexibility going forward but GEO is even more highly leveraged and is acting less prudently now (dividend only decreased, REIT structure maintained).

 

This is an investment that has a personal value component and the following picture is inappropriate in a way but it seems that private prisons are reaching a trough level of disillusionment.

 

 

Basically, i'm long the prison population in the US and public-private partnerships in infrastructure spending. So, their 'properties' segment (real estate built and leased to government for reasons other than prison-related) also has optionality.

[Foreign Tuffett]

https://adventuresincapitalism.com/2020/11/02/my-trump-trades/

 

"Pulling away another onion layer, CXW operates with long-term government contracts. A President cannot simply cancel these contracts, especially as so much of the prison infrastructure was outsourced to private operators and there is nowhere to put these inmates."

 

 

Um, actually they can. Most recent 10-K:

 

"Our management contracts generally provide our customers with the right to terminate our management contracts at any time without cause."

 

"our government partners can generally terminate our management contracts for non-appropriation of funds or for convenience."

 

"Additionally, most facility management contracts contain clauses that allow the government agency to terminate a contract without cause, and are generally subject to legislative appropriations."

 

 

 

Less than a month ago a government customer kicked out CoreCivic and started employing the facility's employees directly. He seems oblivious to this very obvious risk. 

 

https://www.wsmv.com/news/dcso-takes-control-of-the-metro-detention-facility/article_273dfbd8-065b-11eb-a02b-63a3b1b1e3c5.html

[Cigarbutt]

^The perspective is event-driven (short term) and the analysis, relatively superficial.

The Nashville case is an interesting example about the potential transition.

For some details:

http://www.readyforfreddie.com/sites/freddieoconnell/files/DCSO%20Core%20Civic%20Metro%20Davidson%20Detention%20Facility%20Comparison%209.2.pdf

https://bloximages.newyork1.vip.townnews.com/wsmv.com/content/tncms/assets/v3/editorial/0/c6/0c6eb15a-bfff-11ea-a8e1-7347a3aa4c4c/5f03e71aacbca.pdf.pdf

 

One can try to analyze contracts and potential outcomes one by one and can even go to such details as how much fried chicken is necessary to feed the prison population but here are some points of reference.

-an underlying and fundamental aspect is: are privately managed prisons better? (there are ideological and economic answers)

-a secondary aspect is: will public entities have the capital resources to take over the investments (long-lived) required to maintain present capacity?

-management contracts may be terminated but inmates still need a place to reside.

-when negotiating arrangements with public entities, you are facing variable levels of sophistication and ideological perspectives. The fundamental idea is to create value and to share part of this value with the public partners, if they are open to that perspective or if they have limited options.

 

If ideology moves very slowly (there is a timeline between discussions, decisions and actions) and if there persists a mismatch between demand and supply (likely), then there is a market for private prisons and CoreCivic is well positioned.

 

I assume the ‘strategy’ they’re using in Nashville is to leave the area because of poor market prospects, similar perhaps to insurers threatening to leave (or actually leaving) states when appropriate rate increases are not approved.

-----

From a business sense point of view, here's an additional anecdotal contribution. In my area, the recent COVID episode has revealed the depth of supply issues for chronic care homes. In my area, this is a mostly publicly-funded sector but the private capital segment is also quite important. The issues around chronic care homes are slightly less 'sensitive' than prisons perhaps, in terms of expectations about what the government should do, but similar principles apply. Right at this moment, i'm participating in a webinar with relevant actors describing the newly realized situation. There was a lot of noise around privately-run homes (some were poorly run (especially human resources)) and costs had been excessively cut to the bone) with very obvious consequences, including for public opinion and political orientation. However, at this point, it is being realized that 1-to remove the private capital from the pool will mean very high levels of public investments during a period where capital is pulled in many directions and 2-the present status of public infrastructures is very poor with many homes needing to be simply destroyed and rebuilt in order to meet modern standards. It will be messy but there will be opportunities for private projects. i see many parallels between the very concrete options around me and what CoreCivic has to offer.

-----

@LC, if you read this,

i seem to remember that you have commented on this (private prisons) (in the politics section...), do you have anything to add to destroy the thesis?

 

[Guest roark33]

Kuppy is oblivious to 95% of the risks he takes on, but don't worry, no matter how the trade works, he will certainly say he won.  If you get his fund letters, his returns look a lot different from what he writes about publicly. 

 

 

https://adventuresincapitalism.com/2020/11/02/my-trump-trades/

 

"Pulling away another onion layer, CXW operates with long-term government contracts. A President cannot simply cancel these contracts, especially as so much of the prison infrastructure was outsourced to private operators and there is nowhere to put these inmates."

 

 

Um, actually they can. Most recent 10-K:

 

"Our management contracts generally provide our customers with the right to terminate our management contracts at any time without cause."

 

"our government partners can generally terminate our management contracts for non-appropriation of funds or for convenience."

 

"Additionally, most facility management contracts contain clauses that allow the government agency to terminate a contract without cause, and are generally subject to legislative appropriations."

 

 

 

Less than a month ago a government customer kicked out CoreCivic and started employing the facility's employees directly. He seems oblivious to this very obvious risk. 

 

https://www.wsmv.com/news/dcso-takes-control-of-the-metro-detention-facility/article_273dfbd8-065b-11eb-a02b-63a3b1b1e3c5.html

[gg]

Kuppy is oblivious to 95% of the risks he takes on, but don't worry, no matter how the trade works, he will certainly say he won.  If you get his fund letters, his returns look a lot different from what he writes about publicly. 

 

Always wondered how his investors have fared. His positions seem to have drastic winners and losers, so difficult to know how it all nets out. Could you share his actual investor returns if you have them?

[Guest roark33]

His fund is actually pretty new or maybe he started a new one, you can sign up on his website, but he doesn't disclose the track record, just the quarterly numbers.  It's hugely volatile.  Down 41% in Q1, up 50% in Q2 and up 29% in Q3. 

here is this year's letters:

 

https://f.hubspotusercontent00.net/hubfs/6004402/Quarterly%20Letters/2020/2020%20Q3%20Investor%20Letter.pdf?utm_medium=email&_hsmi=98509227&_hsenc=p2ANqtz--L8hkHoeiid5pqG8RilNOz0L_5zpt2O5gosTp5aghDvlpjR1ODN3uGDjAv9Tca_4ri-d2YrhDEwb36MkOngMuqN-nu8A&utm_content=98509227&utm_source=hs_email

 

 

 

https://f.hubspotusercontent00.net/hubfs/6004402/Quarterly%20Letters/2020/2020%20Q2%20Investor%20Letter.pdf?utm_medium=email&_hsmi=91745275&_hsenc=p2ANqtz-_-s3orzzltTCWGvhMc1xtuAdzGrT3xHbftnh4ZbyAr8jt_WYhxvo8oUfSnXWdnUG2f2vBpyzWeVZsY-0EwNL9-PedqWQ&utm_content=91745275&utm_source=hs_email

 

 

 

https://f.hubspotusercontent00.net/hubfs/6004402/Quarterly%20Letters/2020/2020%20Q1%20Investor%20Letter.pdf?utm_medium=email&_hsmi=87377688&_hsenc=p2ANqtz--HBbwLiPmVMh9NaKzB3okZH9aUGblpS-gOQ2xjJqDuAML2S8DiahEoUZaUwcKIBz5ejrhk&utm_content=87377688&utm_source=hs_email

[Gregmal]

I do like his style. The "Looting Basket" lol.

[Guest roark33]

Don't worry, Kuppy will say he sold yesterday....

 

Same thing as he did with his shipping stocks that he talked about daily on VIC

[Spekulatius]

Don't worry, Kuppy will say he sold yesterday....

 

Same thing as he did with his shipping stocks that he talked about daily on VIC

 

Is this the Kuppermann with the Mongolian real estate empire? I guess adventures in capitalism is befitting.