Mental Models discussed in this podcast:
- Blood in the Streets
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You can find out more information by listening to episode 11 of this podcast.
Should you invest in Private Prisons? – Show Outline
The full show notes for this episode are available at https://www.diyinvesting.org/Episode38
Blood in the Streets – Mental Model
- The best time to invest is often when an industry is most hated.
- The private prison industry is a current example of an industry with large amounts of negative news coverage leading to lower stock prices.
- Previously, I took advantage of a similar situation in 2015/2016 during the oil price crash. At that time, the oil industry was similarly hated.
Major Companies in the Private Prison Industry
- Core Civic
- The GEO Group
- Both offer dividend yields exceeding 10%
Reasons for the current industry hate
- Political headwinds
- Alleged problems at specific companies
- Moral reasons
Summary
Opportunity in the stock market does not often coincide with the hot industry of the day. Instead, you are most likely to find value investments when broad industries or individual companies suffer from temporary hatred and disdain. The private industry currently fits the bill. The companies in this industry may not be a good investment or companies that you even want to invest in. However, the private prison industry currently offers a good example of the sorts of occasions where value investing tends to shine.
