Hodges Capital Loads Up On 507,000 GEO Group Shares

On Nov. 7,, Hodges Capital Management Inc. disclosed a purchase of 507,012 shares of GEO, increasing its position by an estimated $8.8 million.

• Change in position: 507,012 shares added, net value increase of $8.8 million
• Transaction accounts for 0.99% of 13F AUM
• Post-trade stake: 955,386 shares valued at $19.6 million
• Position now 1.7% of AUM

What happened

According to a filing with the Securities and Exchange Commission dated Nov. 7, Hodges Capital Management Inc. increased its stake in The GEO Group (NYSE:GEO) by 507,012 shares in the third quarter. The position’s reported value rose to $19.6 million at quarter’s end, reflecting both additional purchases and changes in share price.

What else to know

• The fund increased its GEO holding, now representing 1.7% of its reportable U.S. equity AUM.
• Top five holdings after the filing:
  • NASDAQ: WULF: $43.2 million (3.7% of AUM)
  • NASDAQ: NVDA: $39.0 million (3.4% of AUM)
  • NYSE: UBER: $35.5 million (3.0% of AUM)
  • NYSE: TPL: $33.6 million (2.9% of AUM)
  • NYSE: CLF: $29.7 million (2.5% of AUM)
• As of Nov. 6, GEO shares were priced at $15.41, down 28.3% over the past year, lagging the S&P 500 by 41.7 percentage points.

Company overview

Company snapshot

The GEO Group, Inc. provides correctional, detention, and community reentry services through secure facilities and supervision programs in the United States, Australia, and South Africa. Services include secure facilities management and rehabilitation programs, and it produces revenue primarily from long-term government contracts. GEO Group's main customers include U.S. federal, state, and local government agencies, as well as international public sector clients in Australia and South Africa.

Foolish take

Hodges Capital Management meaningfully added to it GEO Group position. In fact, it more than doubled its share ownership in three months, to over 955,000 shares. At quarter's end, it was the fund's 15th largest holding.

Details about its new position come on the heels of Geo Group's third-quarter earnings release. The company reported a 13.1% increase in revenue to $682.3 million. Its earnings, adjusted to eliminate certain items, came in at $0.25 a share, up 19% compared to the $0.21 earnings per share in the year-ago period.

Geo Group highlighted high-profile contract wins, including those with the U.S. Customs and Immigration Enforcement (ICE). These include housing and transporting detainees. These don't come without controversy, and the company has faced litigation in the past.

Nonetheless, despite top-line and bottom-line growth, the market reacted negatively to the earnings release, likely due to its fourth-quarter guidance. They sent the share price down 10% in the following two days. Investors should take note of Hodges Capital Management's next quarterly holdings release. An increase in shares would indicate the firm's long-term confidence.

Glossary

13F AUM: The total value of U.S. equity securities a fund manager reports on SEC Form 13F.

AUM (Assets Under Management): The total market value of investments managed on behalf of clients by a fund or firm.

Stake: The ownership interest or position held by an investor or fund in a particular company.

Fee-for-service model: A business approach where clients pay for each service provided, rather than a flat or bundled rate.

Correctional, detention, and community reentry services: Services related to managing prisons, supervising detainees, and helping individuals transition back into society.

Facility management: The operation and oversight of buildings or complexes, especially in the context of secure or correctional environments.

Supervision services: Monitoring and managing individuals, often as part of parole, probation, or electronic monitoring programs.

Government contracts: Agreements to provide goods or services to government agencies, often long-term and subject to specific regulations.

TTM: The 12-month period ending with the most recent quarterly report.

Lawrence Rothman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Uber Technologies. The Motley Fool has a disclosure policy.