Michael Burry’s 5 New Stock Picks

3. The GEO Group, Inc. (NYSE: GEO)

Value: $7,488,000
Percent of Michael Burry’s 13F Portfolio: 3.33%
Number of Hedge Fund Holders: 18

Florida-based REIT Geo Group ranks 3rd on the list of Michael Burry’s top new stock picks as his hedge fund Scion Asset Management bought 845,152 shares of the company, worth $7.5 million.  Geo Group mainly invests in private prisons and mental health facilities in the U.S. U.K. Europe, Australia and Africa. The company has strong partnerships with governments. As of 2019, over half of the company’s revenue come from its partnership with federal agencies. Last month, the company priced a private offering of $200 million of 6.50% exchangeable senior unsecured notes due 2026 by its wholly-owned subsidiary, GEO Corrections Holdings.

A total of 18 hedge funds tracked by Insider Monkey were bullish GEO at the end of the fourth quarter, up from 12 funds a quarter earlier. Arrowstreet Capital is the biggest stakeholder in the company, with 2.69 million shares, worth $23.8 million.

Miller Value Partners, in their Q4 2020 investor letter, said that The GEO Group, Inc. (NYSE: GEO) was the top detractor in their fourth quarter 2020 results.

Here is what Miller Value Partners has to say about The GEO Group, Inc. in their Q4 2020 investor letter:

“GEO Group (GEO) was the top detractor over the quarter, falling 19.4%. The company reported Q3 revenue of $579.1M (-1% Quarter-over-Quarter (Q/Q)), net operating income of $151.4M (+2% Q/Q), and Earnings Before Income, Taxes, Depreciation, Amortization, and Restructuring (EBITDAR) of $112.1M (-1% Q/Q). Adjusted funds from operations (AFFO) of $0.67 drove 2.0x coverage on the quarterly dividend of $0.34/share (15.4% annualized yield). GEO exited the quarter with cash of $54M and net debt of $2.6Bn, which on TTM EBITDAR of $448.8M implies net leverage of 5.8x. Management lifted Fiscal Year (FY) 20 guidance across the board, including revenue +0.3% to $4.347Bn, Net Operating Income (NOI) +3% to $609M, EBITDAR +4.4% to $429M, and AFFO +5.6% to $2.44/share (28% FCF yield). Additionally, GEO maintained guidance for $100M of debt paydown in 2020 and a minimum of $50M each year moving forward, which coupled with savings from the previously announced reduced dividend will be applied towards debt reduction.”