Stock investors know that oil costs, terrorism, and corporate debt restructuring, things that really cannot be controlled, have a large influence on the stock market. Many investors avoid airline stocks for that reason. They cannot regulate one of their biggest expenses (fuel) and an act of terrorism can certainly damage the industry.
Why are cruise stocks any better? Rising fuel costs along with Hurricane Katrina resulted in lower stock rates for companies like Carnival Corporation and Royal Caribbean Cruises Ltd. Those 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 industry received a lot of bad publicity.
Certainly, you will find many negatives for cruise stocks and shares, but some stock investors are bullish. Initially, there is no direct indication that the disappearing honeymooner from Connecticut has hurt ticket prices. Valuations on these stocks and shares also look very good.
Carnival Corporation trades at sixteen times estimated 2006 profits. 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 strong as only 4 percent of Americans have ever gone on a cruise.
When considering cruise stocks, remember the risks. A sharp boost in fuel rates or an additional terrorist attack would likely have an undesirable impact on cruise stocks.
If you're unsure of this investment, do you know how to short a stock? This could be an obviously better path for you, especially if you're suffering from corporate debt restructuring.
In my opinion the risk outweighs the possible reward as I don't anticipate cruise lines to drastically outperform the broader market.
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