In this article, we will explore the 10 best prison and law enforcement stocks to invest in.
The United Nations Office on Drugs and Crime (UNODC) report “Prison Matters 2024: Global Prison Population and Trends; A Focus on Rehabilitation” found that after a decline during the COVID-19 pandemic, the global prison population rose to approximately 11.5 million in 2022, reflecting a 5.5% increase since 2012. Despite this rise, the overall percentage of incarcerated individuals compared to the total world population has actually decreased, primarily due to faster population growth.
Overcrowding remains a significant issue, affecting over 60% of countries, which raises serious concerns regarding the health and human rights of inmates. Additionally, there is a pressing need for improved measures to prevent deaths in custody, as suicide accounts for more than 10% of all prison deaths. In some countries, prisons also face staffing shortages, which can compromise safety and hinder rehabilitation efforts.
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Innovations in Technology for Prisons and Law Enforcement
The landscape of prisons and law enforcement is evolving, marked by significant trends and changes in policy. The use of technology in law enforcement is on the rise, particularly with artificial intelligence (AI) tools designed to streamline operations and reduce administrative burdens. As reported by CNBC on November 26, many companies are stepping in to assist police departments. For example, Truleo has developed an AI technology that automatically generates narratives by capturing real-time voice notes from officers in the field. CEO of Truleo, Anthony Tassone, emphasizes that this method to generate police reports is both efficient and ethical.
Another company, 365Labs, focuses on improving the quality of police reports through AI-driven grammar and error correction. CEO of 365Labs, Mohit Vij, acknowledges that while AI can help with basic writing tasks, human judgment remains crucial for serious incidents like burglaries or assaults. This combination of technology and human oversight aims to enhance the efficiency of law enforcement while ensuring that officers can effectively serve their communities.
Recent Events and Market Reactions
On November 11, CNBC reported that private prison stocks rose after President-elect Donald Trump’s appointment of Tom Homan as his “border czar.” Homan, who led Immigration and Customs Enforcement (ICE) during Trump’s first term, will oversee all deportation efforts for undocumented immigrants. Trump emphasized that Homan will manage security at the southern and northern borders, as well as maritime and aviation security.
Previously, in July, Homan had stated his intention to run an extensive deportation operation, claiming it would be the largest in US history. Analyst Isaac Boltansky from BTIG noted that a second Trump administration would likely increase contracts with the US Marshals Service and the Federal Bureau of Prisons, suggesting a more aggressive approach to border enforcement that could benefit companies involved in immigration enforcement and detention services.
With this background in mind, let’s take a look at the 10 best prison and law enforcement stocks to invest in.
A prison guard walking down a hallway filled with inmates in a correctional facility.
Methodology
To compile our list of the 10 best prison and law enforcement stocks to invest in, we used the Finviz and Yahoo stock screeners to find the largest security and law enforcement companies. We also reviewed our own rankings and consulted various online resources. We carefully verified our list to remove any companies that can not be classified as prison and law enforcement stocks.
From an initial pool of more than 20 prison and law enforcement stocks, we focused on the top 10 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 10 best prison and law enforcement stocks to invest in are ranked in ascending order based on the number of hedge funds holding stakes in them.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Prison and Law Enforcement Stocks To Invest In
10. NICE Ltd. (NASDAQ:NICE)
Number of Hedge Fund Holders: 24
NICE Ltd. (NASDAQ:NICE) is an Israeli technology company that ranks among the best prison and law enforcement stocks to invest in. The company specializes in customer relations management software, artificial intelligence (AI), and digital and workforce engagement management. NICE Ltd. (NASDAQ:NICE) offers law enforcement services such as incident reconstruction, automated case building, evidence connections and analytics, and evidence sharing. NICE Evidencentral is the company’s digital evidence management platform for law enforcement, public safety, and justice.
In the third quarter of 2024, the company reported impressive financial results, with total revenue increasing by 15% year-over-year to $690 million. This growth was fueled by a remarkable 24% rise in cloud revenue, reaching $500 million. The company’s operating income surged 20% to $221 million, resulting in an operating margin of 32%. Additionally, earnings per share rose by 27% to $2.88, showcasing robust profitability.
The company also reported a significant increase in operating cash flow, which reached $159 million, reflecting a 32% year-over-year growth. As of September 30, 2024, NICE Ltd.’s (NASDAQ:NICE) total cash and cash equivalents, and short-term investments were $1,526.7 million. The company is well-equipped to invest in future innovations and expand its market reach.
Overall, NICE Ltd.’s (NASDAQ:NICE) strong financial performance, innovative AI-driven solutions, and strategic focus on cloud services make it an attractive investment option.
9. CoreCivic Inc. (NYSE:CXW)
Number of Hedge Fund Holders: 26
CoreCivic Inc. (NYSE:CXW) is a company that owns and manages private prisons and detention centers. It is one of the largest prison operators in the US. The company provides detention management and correctional services to governmental agencies. CXW ranks among the best prison stocks to invest in.
In the third quarter of 2024, the company reported a total revenue of $491.6 million, marking a 2% increase year-over-year. CoreCivic Inc. (NYSE:CXW) reported a significant 52% rise in net income, which reached $21.1 million. This financial growth underscores CoreCivic’s (NYSE:CXW) effective management and operational strategies. As one of the largest owners of partnership correctional, detention, and residential reentry facilities in the US, CoreCivic Inc. (NYSE:CXW) is uniquely positioned to meet the increasing demand for government solutions.
In the third quarter of 2024, CoreCivic’s (NYSE:CXW) overall occupancy in its Safety and Community segments rose to 75.2%, up from 72% during the same period last year. This growth is attributed to a higher utilization of existing contracts, especially with the US Immigration and Customs Enforcement (ICE), as well as four new contracts secured in late 2023 and another contract signed in the third quarter of 2024. Specifically, occupancy in the Safety segment increased from 72.6% to 75.7%, while the Community segment saw an improvement from 62.8% to 66.7%. These developments highlight CoreCivic’s (NYSE:CXW) strategic focus on expanding its service capacity and responsiveness to governmental needs.
8. The GEO Group Inc. (NYSE:GEO)
Number of Hedge Fund Holders: 28
The GEO Group Inc. (NYSE:GEO) is a C corporation that specializes in the management and operation of private prisons, correctional facilities, and mental health facilities. The company provides a range of services for detention, community reentry, and secure processing. The GEO Group Inc. (NYSE:GEO) also offers services such as electronic monitoring, secure transportation, and correctional and mental health care. GEO is one of the best prison stocks to buy.
In the third quarter of 2024, the company reported total revenues of $603.1 million, slightly up from $602.8 million in the same quarter last year. The net income attributable to The GEO Group Inc. (NYSE:GEO) was $26.3 million, or $0.19 per diluted share, an increase from $24.5 million or $0.16 per diluted share in Q3 2023. The company faced challenges in its Electronic Monitoring and Supervision Services segment. However, The GEO Group Inc. (NYSE:GEO) sees potential for growth with 18,000 available beds across its facilities that could boost financial performance if utilized fully.
On October 4, 2024, The GEO Group Inc. (NYSE:GEO) announced that the US Immigration and Customs Enforcement (ICE) extended its contract for the Adelanto ICE Processing Center in California through December 2029. This extension highlights GEO Group’s (NYSE:GEO) ongoing role in providing secure housing and support services, reinforcing its position in the law enforcement sector.
7. Federal Signal Corporation (NYSE:FSS)
Number of Hedge Fund Holders: 32
Federal Signal Corporation (NYSE:FSS) is an American manufacturer that specializes in innovative equipment, signaling products, and communication and security systems. The company designs, manufactures, and supplies its products and total solutions that serve municipal, governmental, industrial, and commercial customers. The company’s Safety and Security Systems Group provides comprehensive solutions used by law enforcement, fire rescue, and emergency medical services to protect people and property. Federal Signal Corporation (NYSE:FSS) is known for its advanced police car lights, sirens, push-bumpers, and tire deflation devices, making it a key player in promoting safety for first responders and the communities they serve.
In the third quarter of 2024, the company reported net sales of $474 million, an increase of 6% from the previous year. Operating income rose by 21% to $75.9 million, while net income reached $53.9 million, translating to a diluted earnings per share (EPS) of $0.87, up 23% year-over-year. The Safety and Security Systems Group performed well, achieving a 4% increase in sales with an adjusted EBITDA margin of approximately 23%. Federal Signal Corporation’s (NYSE:FSS) backlog grew to $1.03 billion, reflecting strong demand for its products. In Q3, the company also generated $69 million in cash from operations, allowing it to pay down debt and maintain a solid financial position.
In October, Federal Signal Corporation (NYSE:FSS) completed the acquisition of Standard Equipment Company, a leading distributor of specialty maintenance and infrastructure equipment for municipal and industrial markets. This strategic move will expand Federal Signal Corporation’s (NYSE:FSS) aftermarket services and target new customer segments. With strong financial performance and growth strategies in place, Federal Signal Corporation (NYSE:FSS) represents a promising investment opportunity in the law enforcement sector.
6. Olin Corporation (NYSE:OLN)
Number of Hedge Fund Holders: 33
Olin Corporation (NYSE:OLN) is a manufacturer and distributor of chemical products and a leading US manufacturer of ammunition. Through its Winchester ammunition brand, the company produces and distributes sporting ammunition, law enforcement ammunition, reloading components, small caliber military ammunition and components, and industrial cartridges.
In the third quarter of 2024, the company reported sales of $1.58 billion, down from $1.67 billion in the same quarter last year. Olin Corporation (NYSE:OLN) faced challenges due to Hurricane Beryl, which impacted operations and is expected to result in a total loss of approximately $135 million for 2024. Despite these setbacks, Olin Corporation’s (NYSE:OLN) Winchester segment showed resilience, with sales rising to $432.8 million, up from $380.2 million in Q3 2023. This growth was driven by increased military sales and the acquisition of White Flyer in Q4 2023, which enhances the company’s position in recreational shooting sports. Notably, Winchester’s Q3 2024 military shipments and project revenue increased 35% sequentially.
In the Q3 2024 earnings call, Olin Corporation’s (NYSE:OLN) management shared that construction has begun on the Army’s Lake City Next Generation Squad Weapon ammunition facility. This fully funded project by the US Army is expected to enhance Winchester’s revenue from the Lake City operations and increase the company’s involvement in global defense initiatives. The new facility will support the production of advanced ammunition, aligning with the Army’s modernization efforts and solidifying Winchester’s position in the defense sector.
5. Leidos Holdings Inc. (NYSE:LDOS)
Number of Hedge Fund Holders: 34
Leidos Holdings Inc. (NYSE:LDOS) is a leading company that specializes in innovation and technology solutions for customers in highly regulated sectors, including national security, law enforcement, health, weapons systems research and development, and airborne operations.
In the third quarter of 2024, Leidos Holdings Inc. (NYSE:LDOS) reported revenues of $4.2 billion, a 7% increase from the same quarter in the previous year. The company achieved an impressive adjusted EBITDA of $596 million, reflecting a 32% rise year-over-year, and a record adjusted EBITDA margin of 14.2%. During Q3 2024, net bookings totaled $8.1 billion, resulting in a substantial backlog of $40.6 billion by the end of the quarter. Noteworthy contracts that Leidos Holdings Inc. (NYSE:LDOS) was awarded during the quarter include a $331 million agreement to modernize the US Army’s network and a $249 million contract to enhance security at 92 additional Army and select joint-service installation access control points worldwide. These projects demonstrate the company’s commitment to advancing national security through innovative technology.
Over the past year, Leidos Holdings Inc. (NYSE:LDOS) has seen significant growth in its Health & Civil segment. Leveraging a team of scientific experts, this segment has become a leader in both growth and profit margins. Leidos Holdings Inc. (NYSE:LDOS) provides essential services, including disability and occupational health evaluations for clients like the Department of Labor, the FBI, and the US Secret Service. This includes conducting medical disability examinations for veterans and active duty members preparing to discharge, particularly in light of increased demand due to the PACT Act, which enhances support for veterans’ healthcare needs.
With consistent revenue growth, a solid backlog, and strategic contracts in national security, Leidos Holdings Inc. (NYSE:LDOS) stands out as a promising stock for investors interested in the law enforcement sector.
4. CACI International Inc (NYSE:CACI)
Number of Hedge Fund Holders: 38
CACI International Inc (NYSE:CACI) is an American multinational corporation that provides expertise, software, and differentiated technology to customers in support of national security. The company serves the US Department of Defense, homeland security, intelligence, and other branches of the federal government.
CACI International Inc (NYSE:CACI) reported impressive financial results for its first quarter of fiscal 2025, ending September 30, 2024, with revenues of $2.1 billion, reflecting an 11% year-over-year increase. The company reported a net income of $120.2 million, translating to a 42% rise in diluted earnings per share (EPS) to $5.33.
The company’s robust growth is supported by a significant backlog of contracts, with contract awards of $3.3 billion and a book-to-bill ratio of 1.6x. In its Q1 2025, CACI International Inc (NYSE:CACI) was awarded substantial contracts with the US Navy aimed at enhancing capabilities in areas like artificial intelligence and cyber resilience. Such contracts highlight CACI’s strategic focus on addressing critical national security needs and investing in long-term projects.
According to Insider Monkey’s database, 38 hedge funds held stakes in CACI International Inc. (NYSE:CACI) in the third quarter of 2024. Additionally, the median 1-year stock price target for CACI set by analysts indicates a potential upside of 34% from its current price.
3. Tyler Technologies Inc. (NYSE:TYL)
Number of Hedge Fund Holders: 40
Tyler Technologies Inc. (NYSE:TYL) is a software company that provides software and technology services for the public sector, including law enforcement and other agencies. Tyler Technologies’ (NYSE:TYL) Enterprise Corrections software also helps jails and other correctional facilities automate business processes and improve efficiency.
In the third quarter of 2024, Tyler Technologies Inc. (NYSE:TYL) reported impressive financial results. Total revenues reached $543.3 million, marking a 9.8% increase compared to the same period last year. Notably, recurring revenues from subscriptions and maintenance grew by 12.1% to $462.8 million, which now constitutes 85.2% of total revenues, up from 83.4% in Q3 2023. This shift indicates a robust demand for their subscription-based services, reflecting stability and predictability in revenue streams.
The company’s subscription revenues surged to $347.2 million, with Software as a Service (SaaS) revenues increasing by 20.3% to $166.6 million. This growth marks the 15th consecutive quarter of over 20% growth in SaaS revenue, demonstrating Tyler Technologies’ (NYSE:TYL) successful transition to cloud-based solutions. During the quarter, Tyler Technologies Inc. (NYSE:TYL) has also made strategic advancements by signing six new SaaS contracts for its public safety solutions, including significant contracts with police departments in Frisco and Round Rock, Texas. These contracts not only enhance the company’s market presence but also illustrate the growing trend of SaaS adoption among clients.
2. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 43
Palantir Technologies Inc. (NYSE:PLTR) is a data analytics and artificial intelligence (AI) company with a strong focus on the defense and law enforcement sectors. The company provides powerful analytics tools that help government agencies analyze vast amounts of data to uncover patterns and actionable insights. Its software-as-a-service (SaaS) model allows clients to access its platforms continuously for a recurring fee, ensuring steady revenue.
The company has its roots in the US war on terror during the 2000s, where it played a crucial role in sensitive missions, including the search for Osama bin Laden. Over time, Palantir Technologies Inc.’s (NYSE:PLTR) technology has been utilized by agencies like Immigration and Customs Enforcement (ICE) for law enforcement purposes, particularly during the Trump administration for profiling and deportations. Following Donald Trump’s return to the White House, there has been a surge of optimism among investors regarding increased federal spending on national security and defense initiatives. As of November 26, Palantir Technologies Inc. (NYSE:PLTR) has surged nearly 44% over the past month.
In Q3 2024, Palantir Technologies Inc. (NYSE:PLTR) reported impressive financial growth, with US revenue increasing by 44% year-over-year to $499 million. The US government segment alone saw a 40% revenue growth, reflecting strong demand for its services in national security. The company secured 104 deals worth over $1 million during the quarter and grew its customer count by 39% year-over-year. On September 20, 2024, Palantir Technologies Inc. (NYSE:PLTR) secured a significant five-year contract to expand its Maven Smart System capabilities across all branches of the US military, including the Army, Air Force, Space Force, Navy, and Marine Corps.
1. Axon Enterprise Inc. (NASDAQ:AXON)
Number of Hedge Fund Holders: 46
Axon Enterprise Inc. (NASDAQ:AXON), formerly known as TASER International, is a leading American company focused on developing technology and products for public safety, including military and law enforcement applications. The company’s suite of products and solutions includes TASER energy devices, body cameras, in-car cameras, cloud-hosted digital evidence management solutions, productivity software, and real-time operations capabilities.
In Q3 2024, Axon Enterprise Inc. (NASDAQ:AXON) reported impressive financial results, with revenue reaching $544 million, a 32% increase year-over-year. This growth was driven by strong demand for its TASER products and cloud services, both of which saw a 36% rise year-over-year. Axon’s (NASDAQ:AXON) annual recurring revenue also grew 36% to $885 million, highlighting its successful subscription model. Axon’s net income was $67 million, supporting a robust adjusted EBITDA of $145 million.
Axon Enterprise Inc. (NASDAQ:AXON) has managed to achieve over 30% annual revenue growth in each of the first three quarters of 2024. Q3 2024 marks the company’s 11th consecutive quarter of growth above 25%. The company has positioned itself as a leader in public safety technology by focusing on innovative solutions. Axon Enterprise Inc.’s (NASDAQ:AXON) commitment to artificial intelligence (AI) is evident in its suite of AI-powered products, such as Axon Auto-Transcribe, Draft One, automatic license plate reading (ALPR), and video redaction, which are designed to improve operational efficiency and investigative accuracy. These tools help law enforcement agencies streamline their processes.
As of the third quarter of 2024, Axon Enterprise Inc. (NASDAQ:AXON) was held by 46 hedge funds, according to Insider Monkey’s database. Carillon Tower Advisers stated the following regarding Axon Enterprise Inc. (NASDAQ:AXON) in its “Carillon Eagle Mid Cap Growth Fund” third quarter 2024 investor letter:
“Axon Enterprise Inc. (NASDAQ:AXON) is a market-leading provider of next-generation law enforcement technology solutions. The company has had ongoing success with new product rollouts within both its TASER and body camera product lines, as well as its innovative software offerings, and the stock has responded accordingly. The company remains intensely focused on the development of new law enforcement solutions, and we believe recent developments in interesting areas such as drones, as well as in artificial intelligence-enabled solutions for evidence- and administrative-related uses, could provide an additional tailwind to the company’s robust growth.”
Overall, AXON ranks first among the 10 best prison and law enforcement stocks to invest in. While we acknowledge the potential of prison and law enforcement stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AXON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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