You might get déjà vu after reading today’s headline…
It’s very close to what we published on January 11, after all.
But look again…
Our original essay focused on popular companies that attract investors, like Tesla (TSLA).
We discussed how Tesla founder Elon Musk is changing the way we get around. He sells electric cars at doable prices to the masses. And like it or not, he’s succeeding.
It’s a great story. But as we discussed, you can love the story and still hate the stock.
Tesla isn’t a good stock to own right now. It’s too expensive. And it’s in a big downtrend.
As you’ll see today, the opposite is also true…
You can hate the story and still love the stock.
One historically unpopular company in particular is in a “disagreeable” business. Heck, its methods of profiting might even disgust you.
But as I’ll explain, that’s exactly what makes it investable. And even better, the Power Gauge is flashing “green” on a couple key factors for this company right now…
I’m talking about the GEO Group (NYSE: GEO) – a for-profit prison enterprise.
To reiterate investing legend Peter Lynch’s term, GEO’s business model is “disagreeable.” For better or worse, the company makes billions of dollars from people who’ve been put behind bars.
In the end, GEO isn’t exactly saving humanity or revolutionizing the world…
That’s what makes it far less sexy than the Teslas of the world. And it’s why most investors don’t pay attention to it.
But by focusing on a company’s technicals and fundamentals, we can pinpoint good opportunities even within “hated stories.” That’s where the Power Gauge comes in…
Regular PowerFeed readers know all about our one-of-a-kind system. It weighs 20 different factors to help us figure out whether a stock is great or not.
Now, the Power Gauge currently ranks GEO as “neutral” overall. That isn’t great. But when we drill down, we see a lot of things to like about the stock right now…
For example, its projected price-to-earnings ratio is “very bullish.” That makes sense…
Favorable valuations and unpopular businesses often go hand in hand. If most investors are ignoring a stock, it’s often cheap to own. This dynamic creates opportunities in the market.
In addition, the earnings surprise factor in the Earnings category and the earnings estimate trend factor in the Experts category are both “bullish” today. That’s important because it tells us that Wall Street is starting to focus on the stock rather than the company.
In other words, analysts realize that… you can hate the story and still love the stock.
And it gets better…
The following chart shows GEO’s performance over the past year. I want you to focus on the two lower panels – Chaikin Money Flow and relative strength versus the S&P 500 Index…
The Chaikin Money Flow indicator signals that the so-called “smart money” is flowing into this stock. And you can see that it has been firmly in the green since November.
Meanwhile, GEO has outperformed significantly since last May. The stock is up an incredible 70% over the past eight months. And the S&P 500 is down about 3% in that span.
This type of outperformance is great to see. It tells us that the trend is in our favor.
GEO isn’t a sexy stock. And yet, when we look at the whole picture, it’s clear why Wall Street is focusing more on the stock than the company’s “disagreeable” story.
The Power Gauge helps us see that. And in the end, it’s important to remember…
You can hate the story and still love the stock. That’s the case with GEO today.
Good investing,
Marc Gerstein
