If you’re looking for a company that is not only recession proof, but does better when the economy gets worse, then take a look at private prisons, Cramer said Monday.
According to a recent Financial Times article, states are looking to privatize their prisons in order to close budget gaps. So how should you play it?
There are two “significant” publicly held prisons out there: Corrections Corp of America and GEO Group , according to the “Mad Money” host. Operationally, they are similar. Corrections Corp operates 90,000 prison beds from 61 facilities it owns and 21 facilities it manages. GEO has 80,000 beds and 116 prisons. Both companies profited during the Great Recession, and each has consistently grown earnings every year since 2007.
“These stocks give new meaning to the term recession proof,” Cramer said. “You can't just bust people out of prison when your state runs out of money—they have to keep paying for inmates, at a cost of about $25,000 per inmate per year, and the growth in the national prison population is, sadly, one of the strongest secular trends out there.”
Plus, only about 10 percent of prisons in the U.S. are privatized right now. Since it appears the country is moving more towards private prisons, he thinks both companies have room to grow.