by Katharine Schildt, Assistant Editor, The Oxford Club

With little certainty on Wall Street, many investors have either chosen to “wait it out” or put their heads in the sand. A few brave souls have been keeping their fingers on the pulse, and we’ve been looking for stocks that have wider “moats” than most companies out there.

Unfortunately, in tough economic times – like everyone is currently experiencing – crime rates go up. But there are companies that take advantage of this fact, doing well during normal cycles and better during down times.

Cornell Companies Inc. (NYSE: CRN), a leading provider of corrections and treatment services for both adults and juveniles, saw its fourth quarter profit rise 37% on Thursday.

This jump is attributed in large part to the expansion of three of its prisons: Big Spring Correctional Center, D. Ray James Prison and Great Plains Correctional Facility.

Some of the services Cornell’s facilities provide include incarceration and detention, drug and alcohol treatment, behavioral rehabilitation and treatment, and transition from incarceration.

With a total of 69 facilities in 15 states (plus the District of Columbia), Cornell’s business is spread over numerous municipalities and its social impact is far reaching. But its profits are what we’re excited about.

For the fourth quarter of 2008, Cornell earned $7.4 million, or 50 cents per share, compared with $5.4 million, or 37 cents per share, for the same quarter last year. Analysts expected a profit of 40 cents per share.

But don’t think that the recent performance is a one-and-done deal.

Going back to 2008, Cornell earned $22.2 million, or $1.51 per share, up 86% from $11.9 million, or 82 cents per share, in 2007. Revenue rose 7.2% to $386.7 million from $360.6 million. They’ve been increasing profits and returns for shareholders for quite some time.

Management released its expectations for the rest of the year: all favorable. With earnings per share for the first quarter expected to be between $0.30 and $0.34.

This positive outlook is partly due to the 700-bed expansion at its D. Ray James Prison, beginning in the third quarter of this year.

Aside from prison expansions and organic growth, their strategy hinges on cost-cutting and government incentives. For example, 2008’s fourth quarter benefited from a lower effective tax rate of 37.6%, compared with 39.6% a year earlier. This was largely due to the employment of payroll tax credits.

And many of these incentives don’t look to be temporary, either.

Cornell’s Chairman, President and Chief Executive Officer, James E. Hyman, said, “Cornell finished the year with another quarter of strong execution of our business plan and a resulting increase in earnings above the prior year’s quarter. Looking to 2009, the company expects to deliver another year of solid growth while recognizing the uncertainty in the current budget environment.”

In a period of stagnant – or negative – growth prospects, the phrase recession-proof gets thrown around a lot. But in a broad market decline, like the one we’re in now, no one is unaffected. But there are companies that are safer than others.

It remains to be seen if the political and municipal environments will continue to buffer privately run prisons. But there seems to be no signs that the current positive situation will change. This means good things for Cornell, and good things for investors.

View original at: Investment Advice and Investment Research with a Contrarian Point of View

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