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Corrections Corporation of America Message Board

  • ccastaff ccastaff Aug 27, 2002 10:01 PM Flag

    Next target price around $8.00

    I don't have time tonight to make charts, but since the price held below the $16.00 level as anticipated, we can now expect to see the $8.00ish neighborhood. Don't hold me to an exact projection because we are trying to hit a trendline with a very negative slope and even though we can expect the price to drop to the trendline, we can't tell how long in weeks it will take. By the time we hit it the descending trendline it could be considerably lower than $8.00. I�m just swaging the $8 area because it is a 0.5 fibonacci of $16.

    We can expect a bounce to occur when we get down to the $11.60ish area, but don't get too excited.

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    • Some time in the probably not too distant future. Man for someone that is so confident in the charts that is a change. I prefer and will still look at performance. This stock will have up and downward movement as all stocks do. Your misinformation is starting to wear thin and I am sure your socks are starting to turn brown from the stuff you are standing in. FWIW we all can be wrong at times.

    • ccastaff, maybe one day I'll pick one that doesn't have an abyss still waiting below. Thanks for your comment.

    • Hey Flipper, I was just looking at a longer term chart of TRNT and realized that I didn't go back far enough when looking for a projected low. In the corrective phase since the highs of $6.625 in '95, there was a low of $0.468 in October of '98 so you should anticipate a lower low some time in the probably not too distant future. FWIW (I may be wrong.)

    • It's amazing... If you overlay the charts for CXW and TRNT, they are not dissimilar. The both had their low in December '00 and they have both made a rising wedge pattern from there into a decline. Here is a link to a tutorial on the rising wedge:

      Notice that after the rising wedge, both examples made new lows. This rising wedge tutorial is much more simplistic than the same scenario using Elliot Wave Theory, but both give the same results.

      The good news for TRNT is that it only has to drop to ~$0.75 to complete it's "C" wave, whereas CXW must theoretically drop to ~$1.75 which percentage wise is way more.

      The other good news for both is that once they complete this pattern, (assuming an un-cataclysmic market like the dysinflationary one we have been musing about), we should have clear sailing from there to reach new highs for both stocks.

      If bad things that happen don't kill you, they make you stronger. :-)

    • You're right CCastaff, certainly stock prices and their trading value sometimes have no meaning to fundamentals. For example. I own a company that has $.91/shr. in cash. A break-up value of $2.89/shr. And should earn $$.20 a share this year and has been profitable. What would you say this stock is worth? They set up computer network, sell computers and service them. If we give it a market multiple of 20 you'd say $4.50, right. The CEO talks of decent growth prospects too. But it doesn't, it trades for $1.00 or cash and has dropped in the last few years from $2-$3. Does that make sense? Sometimes things don't always add up.

      FYI, the company is Transnet (TRNT). I am not saying to buy it, just pointing it out.....but it does look like a good buy..;-)

    • Flipper - Great couple of posts - "the way you see it" is pretty accurate!
      Keep 'em coming.
      Thanks, and enjoy the long weekend, all.

    • So I guess the obvious question is why be invested in CXW if debt and assets are going to be a problem? Here's my thinking. If you like to eat a lot and weigh 300 lbs. what's the best way to look "skinny", you guessed it, stand next to someone who weighs 500 lbs. As I see it CXW's competition is the 500 lbs ft man being the Gov't.. They couldn't be efficient even if they tried as far as costs go and we all now why. So our abilty to assure decent profit margins is because our key competitor is, and will always be cost ineffective, IMHO. I really can't think of any other industry that could ride thru a deflation cycle on top of the heap. You know the Gov't would get more and more inefficent during that time by adding more and more employees, cutting technology that cuts employees, etc. to appease the masses.
      WHC went thru a period where out of arrogance ( I guess) they bid contracts almost with no profit. CCA never did that. Their overall margins per inmate have been remarkably steady thanks to great work by their fine warden system. CCA's problem did not relate to their abilty to make a decent profit margin, it was pure and simple over-building as I see it. The industry problems relate to the huge costs in building a prison as I see. This will not change a lot until the private prison sector grows.

      Just my thoughts for the day.


    • Sam great question and I would be interested in others thoughts. I don't expect to see any Japan style deflation but I'm not an economist and guessing like everyone else. I've always heard that deflation is "constructive destruction". All the stuff that's over-build, over-bought and underused gets "put in it's place". Is that vague enough? Deflation relates to assets and the instruments (debt) that causes assets to go up. Real Estate is a classic case, much debt is used to purchase it. It suffers badly as de-leveraging occurs.

      So if assets, goods and services are falling around you in price, being in cash actually is like "making a return", right? Treasuries certainly. I believe gold did well during our last deflation cycle. It's been doing well lately. But mostly it's a collaspe of credit and the asset prices that it's used for as I see it.

      So oil and gas would not be a place to invest or REIT's or any investment similar. The groups have done well lately as dis-inflation has lowered their costs. The problem is if the disinflation cycle turns to deflation. Then revenue falls faster than cost.

      I would think companies that use lots of debt are the ones to be careful of in the years ahead if we dip deeper into a deflation trend. We see it in telecom now where the assets behind the debt plunged, pure over-capacity as investors thru money at them. I would watch the profit margins carefully, if a debt laddened compnay is only making a few percent profit margin then obviously the assets backing the debt it's worth as much as they say and any slip up will mean big problem. If you read the folks that called the Worldcom collaspe it was the slow decline of profit margins that was a tip off, so they say.

      But I know what your saying as an income investor. The idea of buying more and more junk to add yield is not appealing. Having been involved in the markets 20+ years I never could believe I'm sitting here reading that the Fed might lower it's 1.75% fed funds target EVEN LOWER.

    • Wouldn't cash be king with disinflation?

    • First of all I stand corrected, but you have changed your short term sentiment several times.

      Secondly, I agree.

      Thirdly, not always so. My point exactly you have been hollering strong sell since 7/11/01 except for a couple of times when you changed for what ever reason. Here we stand 1/2 dollar lower. Tide has been going out for a while.

      You have a good day.

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