Investors know that oil prices, terrorism, and corporate debt restructuring, areas that really cannot be controlled, have a huge influence on the stock market. Many investors avoid airline shares for that reason. They can't control one of their biggest expenses (fuel) and an act of terrorism can certainly harm the industry.
Why are cruise stocks any better? Rising fuel expenses along with Hurricane Katrina led to lower stock prices for businesses like Carnival Corporation and Royal Caribbean Cruises Ltd. Those two cruise companies account for about 75 percent of the cruise industry, globally.
When George Allen Smith IV, out of Connecticut, vanished while on a Royal Caribbean cruise, the industry received a lot of bad press.
Certainly, you will find many downsides for cruise stocks and shares, but some investors are bullish. First, there isn't any direct indication that the disappearing honeymooner out of Connecticut has hurt ticket prices. Values on these stocks and shares also look good.
Carnival Corporation trades at 16 times estimated 2006 profits. Its historic range is ten to 30 times earnings. Royal Caribbean trades at 14 times projected '06 earnings. Its historic range is 5 to twenty-four times earnings. Growth potential is solid as only 4 percent of Americans have ever gone on a cruise.
When thinking about cruise stocks, remember the potential risks. A sharp surge in fuel prices or an additional terrorist assault would likely have an unfavorable effect on cruise stocks.
If you're unclear about this investment, do you know how to short a stock? This could be a much better path for you, particularly if you're suffering from corporate debt restructuring.
I think the risk outweighs the possible reward as I do not anticipate cruise lines to significantly outperform the broader market.
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