In this article, we discuss the 12 best prison and law enforcement stocks to buy now.
It is no secret that the United States has an inmate problem. There are more people in prisons across the country than the government can accommodate. According to latest figures, the prison population in the US was more than 1.2 million at the end of last year, up nearly 2% from the end of 2021. Despite the rhetoric surrounding immigrants, it is estimated that a large majority of these prisoners, over 84% per the US government, were US citizens. These prisoners come at a high cost to the government.
This is where prison and law enforcement stocks help alleviate some of the burden on the government. The US has a long history of outsourcing prison contracts to private firms for cost benefits. Private firms can build prisons faster than governmental agencies, since they have a financial incentive for doing so, and can also provide better facilities for prisoners. In return, the US government pays a fee to these private firms to house prisoners. The profitability for these firms depends on the numbers of prisoners they house and the facilities they provide to them.
Some prominent prison and law enforcement stocks in this context include Palantir Technologies Inc. (NYSE:PLTR), CACI International Inc (NYSE:CACI), and Leidos Holdings, Inc. (NYSE:LDOS). The success of these firms in the prisons and law enforcement business can be better understood by looking at the returns that their shares have offered to investors. In the past five years, the returns of these firms stood at around 96%, 125%, and 108%. This performance is more impressive given the fact that private prison firms have not been able to get government contracts since mid-2021.
Damon Hininger, the CEO of CoreCivic, Inc. (NYSE:CXW), one of the premier private prison firms across the US, recently outlined how his company managed to grow revenue in the third quarter of 2023 despite the ending of prison contracts with the federal government in late 2022. During the third quarter earnings call, Hininger noted that despite ongoing labor market pressures and related incremental operating expenses in many markets, the firm made notable improvements in the attraction and retention rate as a result of staffing strategies.
“As we have mentioned on past several conference calls, we have made significant investments in our existing staff and have successfully increased our staffing levels through improved recruiting and retention. These investments have enabled us to reduce the amount of temporary incentives from the prior year quarter and have positioned us to accept the additional populations we have begun to experience. From the third quarter of 2022 to the third quarter of this year, occupancy in our Safety segment increased from 70% to 72.6% and occupancy in our Community segment increased from 57.5% to 62.8%. The increase in occupancy in our Safety segment primarily resulted from higher detention populations from our largest government partner, Immigration and Customs Enforcement or ICE.”
Our Methodology
The companies that have interests in prison and law enforcement were selected for the list and ranked according to hedge fund sentiment. In order to provide readers with some context for their investment choices, the analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm.
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Best Prison And Law Enforcement Stocks To Buy Now
12. Serco Group plc (OTC:SECCF)
Number of Hedge Fund Holders: N/A
Serco Group plc (OTC:SECCF) provides public services for the defense sector. It also offers detainee transport and monitoring services for the justice and immigration sectors. The company is based in the United Kingdom.
Serco Group plc (OTC:SECCF) has prison and law enforcement interests in Canada as well. Some of the services it offers to the UK and Canadian government includes base and operational support engineering, and management and information, as well as nuclear, space, and maritime services.
Just like Palantir Technologies Inc. (NYSE:PLTR), CACI International Inc (NYSE:CACI), and Leidos Holdings, Inc. (NYSE:LDOS), Serco Group plc (OTC:SECCF) is one of the best prison and law enforcement stocks to buy now.
11. SoundThinking, Inc. (NASDAQ:SSTI)
Number of Hedge Fund Holders: 7
SoundThinking, Inc. (NASDAQ:SSTI) operates as a public safety technology company that provides transformative solutions and strategic advisory services for law enforcement and civic leadership. On November 8, investment advisory Lake Street maintained a Buy rating on SoundThinking, Inc. (NASDAQ:SSTI) stock and lowered the price target to $25 from $33, backing the firm to achieve double digits growth in 2024.
At the end of the first quarter of 2023, 7 hedge funds in the database of Insider Monkey held stakes worth $34 million in SoundThinking, Inc. (NASDAQ:SSTI), the same as in the preceding quarter worth $42 million.
In its Q2 2023 investor letter, Conestoga Capital Advisors, an asset management firm, highlighted a few stocks and SoundThinking, Inc. (NASDAQ:SSTI) was one of them. Here is what the fund said:
“SoundThinking, Inc. (NASDAQ:SSTI): SSTI provides gunshot detection technology as well as analytics/case management services. In early April, the stock corrected 30% with the surprise election of Brandon Johnson to be the Mayor of Chicago. Mr. Johnson has said he would eliminate the city’s contract with SSTI. We are confident in the significant benefits of SSTI’s technology to high crime cities and are maintaining our position in the stock.”
10. Cadre Holdings, Inc. (NYSE:CDRE)
Number of Hedge Fund Holders: 9
Cadre Holdings, Inc. (NYSE:CDRE) makes and sells safety and survivability equipment. On November 28, Bank of America analyst Ronald Epstein maintained a Buy rating on Cadre Holdings, Inc. (NYSE:CDRE) stock and raised the price target to $38 from $29, noting global safety demand remained strong heading into 2024.
At the end of the third quarter of 2023, 9 hedge funds in the database of Insider Monkey held stakes worth $112 million in Cadre Holdings, Inc. (NYSE:CDRE), compared to 8 in the previous quarter worth $88 million.
In its Q2 2023 investor letter, Maran Capital Management, an asset management firm, highlighted a few stocks and Cadre Holdings, Inc. (NYSE:CDRE) was one of them. Here is what the fund said:
“Cadre Holdings, Inc. (NYSE:CDRE) which we purchased just under two years ago at its IPO, has continued to execute well. The business’ “mission critical products with recurring demand characteristics” set the backdrop for the company to maintain a favorable price/cost spread; margins have expanded and should continue to do so. Cadre rhymes a bit with APG in that I think it can quietly generate exceptional returns as it steadily grows, expands margins, and executes accretive acquisitions.”
9. The GEO Group, Inc. (NYSE:GEO)
Number of Hedge Fund Holders: 12
The GEO Group, Inc. (NYSE:GEO) is a government services provider specializing in design, financing, development, and support services for secure facilities. In early October, Northland analyst Greg Gibas initiated coverage of The GEO Group, Inc. (NYSE:GEO) stock with an Outperform rating and a price target of $14, noting the firm was well-positioned to benefit from increased electronic monitoring of immigrants.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Two Sigma Advisors is a leading shareholder in The GEO Group, Inc. (NYSE:GEO) with 2 million shares worth more than $16 million.
8. Federal Signal Corporation (NYSE:FSS)
Number of Hedge Fund Holders: 13
Federal Signal Corporation (NYSE:FSS) designs, manufactures, and supplies a suite of products and integrated solutions for municipal, governmental, industrial, and commercial customers. On November 2, Federal Signal Corporation (NYSE:FSS) posted earnings for the third quarter of 2023, reporting earnings per share of $0.71, beating market estimates by $0.05.
At the end of the third quarter of 2023, 13 hedge funds in the database of Insider Monkey held stakes worth $117 million in Federal Signal Corporation (NYSE:FSS), the same as in the previous quarter worth $116 million.
In its Q2 2023 investor letter, Conestoga Capital Advisors, an asset management firm, highlighted a few stocks and Federal Signal Corporation (NYSE:FSS) was one of them. Here is what the fund said:
“Federal Signal Corporation (NYSE:FSS): Founded in 1901, FSS is a leading manufacturer of specialized vehicles for maintenance and infrastructure markets (street sweeping, sewer cleaning, hydro-excavation, dump trucks, etc.) as well as safety and security systems (outdoor warning sirens, emergency vehicle lighting, etc.) We are attracted to FSS’s leading market share in attractive and diversified end markets (municipal, publicly funded industrial, etc.) In the nearly eight years since Jennifer Sherman took over as CEO, the company has restructured the product portfolio for higher growth, margins, and cash flow. We believe these strategic initiatives position FSS for robust long-term shareholder returns.”
7. CoreCivic, Inc. (NYSE:CXW)
Number of Hedge Fund Holders: 13
CoreCivic, Inc. (NYSE:CXW) owns and operates partnership correctional, detention, and residential reentry facilities. On November 8, Wedbush analyst Henry Coffey maintained an Outperform rating on CoreCivic, Inc. (NYSE:CXW) stock and raised the price target to $17 from $14, noting that staffing investments have helped CoreCivic to manage a recent increase in occupancy.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Invenomic Capital Management is a leading shareholder in CoreCivic, Inc. (NYSE:CXW) with 1.4 million shares worth more than $16 million.
6. Cohu, Inc. (NASDAQ:COHU)
Number of Hedge Fund Holders: 15
Cohu, Inc. (NASDAQ:COHU) provides semiconductor test equipment and data analytics solutions. On November 7, investment advisory Citi maintained a Buy rating on Cohu, Inc. (NASDAQ:COHU) stock and lowered the price target to $40 from $45.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Royce & Associates is a leading shareholder in Cohu, Inc. (NASDAQ:COHU) with 725,072 shares worth more than $24 million.
Along with Palantir Technologies Inc. (NYSE:PLTR), CACI International Inc (NYSE:CACI), and Leidos Holdings, Inc. (NYSE:LDOS), Cohu, Inc. (NASDAQ:COHU) is one of the best prison and law enforcement stocks to buy now.
In its Q2 2023 investor letter, TimesSquare Capital Management, an asset management firm, highlighted a few stocks and Cohu, Inc. (NASDAQ:COHU) was one of them. Here is what the fund said:
“A new addition to the IT sector this quarter was Cohu, Inc. (NASDAQ:COHU), a semiconductor capital equipment company focused on testing and handling equipment. These products are mainly used in the back-end stages of the manufacturing process where chips are being assembled and packaged.”
5. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 31
Palantir Technologies Inc. (NYSE:PLTR) builds and deploys software platforms for the intelligence community in the United States. On November 2, investment advisory Goldman Sachs maintained a Neutral rating on Palantir Technologies Inc. (NYSE:PLTR) stock and raised the price target to $12 from $11.
At the end of the third quarter of 2023, 31 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Palantir Technologies Inc. (NYSE:PLTR), compared to 39 in the previous quarter worth $987 million.
4. Axon Enterprise, Inc. (NASDAQ:AXON)
Number of Hedge Fund Holders: 31
Axon Enterprise, Inc. (NASDAQ:AXON) manufactures, and sells conducted energy devices. On December 13, investment advisory Morgan Stanley maintained an Equal Weight rating on Axon Enterprise, Inc. (NASDAQ:AXON) stock and raised the price target to $250 from $230, noting the demand for the products of the firm would come back in 2024.
At the end of the third quarter of 2023, 31 hedge funds in the database of Insider Monkey held stakes worth $643 million in Axon Enterprise, Inc. (NASDAQ:AXON), compared to 36 in the previous quarter worth $576 million.
In its Q2 2023 investor letter, Conestoga Capital Advisors, an asset management firm, highlighted a few stocks and Axon Enterprise, Inc. (NASDAQ:AXON) was one of them. Here is what the fund said:
“Axon Enterprise, Inc. (NASDAQ:AXON)’s fundamentals remain robust but suffered from profit taking in the second quarter after strong performance from the stock over the last year. AXON is a public safety technology company and has been a portfolio leader in each of the three prior quarters. AXON’s fundamentals remain robust, with revenue growth of 34% in their most recently reported quarter. AXON is seeing robust growth internationally and in their Fleet product line, and the new Taser 10 is seeing the strongest initial demand in their history.”
3. Olin Corporation (NYSE:OLN)
Number of Hedge Fund Holders: 32
Olin Corporation (NYSE:OLN) manufactures and distributes chemical products. On December 13, investment advisory Citi maintained a Buy rating on Olin Corporation (NYSE:OLN) stock and raised the price target to $59 from $50.
At the end of the third quarter of 2023, 32 hedge funds in the database of Insider Monkey held stakes worth $562 million in Olin Corporation (NYSE:OLN), compared to 41 in the preceding quarter worth $676 million.
In its Q3 2023 investor letter, Madison Investments, an asset management firm, highlighted a few stocks and Olin Corporation (NYSE:OLN) was one of them. Here is what the fund said:
“We exited Chemours Co on the strength of its year-to-date performance and the growing export of chloride-based titanium dioxide from China. Weaker economic growth in China, combined with increased capacity, is a headwind for European and North American pricing. We used these funds to increase our position in Olin Corporation (NYSE:OLN), which pulled back on the retirement of the company’s CEO. We believe Olin’s strategy remains intact and the valuation of the company is attractive.”
2. CACI International Inc (NYSE:CACI)
Number of Hedge Fund Holders: 33
CACI International Inc (NYSE:CACI) provides expertise and technology to enterprise and mission customers in support of national security missions and government modernization. On December 12, CACI International Inc (NYSE:CACI) announced that it was awarded a five-year, single-award, task order valued at up to $420 million from the US Army.
At the end of the third quarter of 2023, 33 hedge funds in the database of Insider Monkey held stakes worth $412 million in CACI International Inc (NYSE:CACI), compared to 32 in the previous quarter worth $586 million.
In its Q3 2023 investor letter, Horizon Kinetics, an asset management firm, highlighted a few stocks and CACI International Inc (NYSE:CACI) was one of them. Here is what the fund said:
“Companies involved in packaging, managing, and transacting with digital assets (i.e., securities exchanges and asset managers) are a focus of the Fund, but those operations are not entirely necessary to qualify a company as being a blockchain beneficiary. CACI International (CACI), a defense electronics contractor, interestingly enough, is becoming involved in blockchain technology from an entirely different entry point: data analysis, and the kind that can come with barriers to entry (95% of its revenues come from the U.S. government).
There is a treasure trove of data available through public, distributed ledgers. And there is a lot of value in knowing who supplied the funds, where else have they been spent, and what fiat currency onramps or offramps are connected to the transaction. These are questions that can typically be answered with enough detective work. Even if specific parties cannot be identified, trends and narratives can be analyzed just by the flow of activity, since all the transaction data of every single token, from the time it was created, resides on the blockchain.”
1. Leidos Holdings, Inc. (NYSE:LDOS)
Number of Hedge Fund Holders: 37
Leidos Holdings, Inc. (NYSE:LDOS) provides services and solutions in the defense, intelligence, civil, and health markets. On November 17, investment advisory upgraded Leidos Holdings, Inc. (NYSE:LDOS) stock to Buy from Hold with a price target of $120, noting the firm was well positioned to take advantage of defense spending trends that focus on cybersecurity and data analytics.
Among the hedge funds being tracked by Insider Monkey, Omaha, New York-based investment firm Millennium Management is a leading shareholder in Leidos Holdings, Inc. (NYSE:LDOS) with 1.5 million shares worth more than $140 million.
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Disclosure. None. 12 Best Prison And Law Enforcement Stocks To Buy Now is originally published on Insider Monkey.
