Posted by: nbaground on: January 25, 2010
Stock investors know that oil costs, terrorism, and corporate debt restructuring, factors that really can't be controlled, have a big influence on the stock market. A lot of investors steer clear of airline stocks because of this. They cannot regulate one of their greatest expenses (fuel) and an act of terrorism can seriously damage the industry.
Why are luxury cruise stocks any better? Rising fuel costs as well as Hurricane Katrina resulted in lower stock rates for organizations like Carnival Corporation and Royal Caribbean Cruises Ltd. These two cruise lines account for about 75 percent of the cruise industry, worldwide.
When George Allen Smith IV, out of Connecticut, disappeared when on a Royal Caribbean cruise, the market received a lot of negative publicity.
Certainly, you'll find many negatives for cruise stocks and shares, but some stock investors are bullish. Initially, there's no direct indication that the vanishing honeymooner from Connecticut has wounded ticket prices. Valuations on these stocks and shares also look excellent.
Carnival Corporation trades at sixteen times projected 2006 earnings. Its historic range is 10 to 30 times earnings. Royal Caribbean trades at 14 times estimated '06 earnings. Its historic range is five to twenty four times earnings. Growth potential is good as only 4 percent of Americans have ever taken a cruise.
When considering cruise shares, remember the risks. A sharp surge in fuel rates or one more terrorist strike would likely have an adverse impact on cruise shares.
If you're unsure of this investment, do you know how to short a stock? This might be a better option for you, specifically if you're experiencing corporate debt restructuring.
In my opinion the risk outweighs the achievable reward as I don't anticipate cruise lines to considerably outperform the broader market.
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