Michael Burry Doubles Down on Prison Stocks With CoreCivic (CXW) Bet

  • CoreCivic (CXW) is the latest addition to Michael Burry’s Scion Capital Management.
  • Via securities filings released today, investors caught a glimpse into Burry’s view of the markets.
  • His trimming down of positions to only highly defensive names is a signal some investors are starting to view seriously.
Michael Burry - Michael Burry Doubles Down on Prison Stocks With CoreCivic (CXW) Bet

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Many investors are keenly watching where the smart money is flowing. For those retail investors who, like myself, view Michael Burry as an extremely sophisticated and successful investor, where Burry goes is where many investors start to look.

A new set of filings released today showed Michael Burry loaded up on yet another prison stock. Private prison operator CoreCivic (NYSE:CXW) was added to Burry’s Scion Asset Management. This follows a top-up of a previous bet on another private prison operator Geo Group (NYSE:GEO). Both stocks are up more than 4% today on this news.

Interestingly, Burry funded these positions with the sale of other holdings in the second quarter. Moving away from tech companies such as Meta Platforms (NASDAQ:META), Burry appears to be taking a very defensive approach to these markets.

With both CoreCivic and Geo Group outperforming the markets by a wide margin this year, it appears these bets are paying off nicely. Let’s dive into what investors should make of this news.

Is Now the Time to Follow Michael Burry Into Prison Stocks?

Whether investors agree or disagree with how the prison system is run in the United States, it’s big business. For Michael Burry, it’s one area of the economy that is about as recession-proof as they come. For an investor who has been more doom and gloom of late, perhaps these are the sorts of stocks to focus on.

Given the rather entrenched nature of government contracts with prison operators, these companies have significant moats. Barriers to entry are high in this space. This makes companies like CoreCivic and Geo Group well-positioned to provide sustainable cash flows in down markets.

Now, these are also companies that have had their fair share of issues in the past. Valuation multiples have remained depressed, despite these stocks appearing to be very cheap. Thus, many investors have viewed such companies as value traps for some time.

That said, with Michael Burry making a big bet here, many are likely to follow. Burry was right about the financial crisis in 2008, and he’s been sounding the alarm now. For those who want to ride his coattails, these are two stocks worth watching right now.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


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