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Luxury Cruise Stocks: Risk And Reward Assessment

Author: Craig

Stock investors know that oil costs, terrorism, and corporate debt restructuring, things that really can't be controlled, have a huge influence on the stock market. Many investors steer clear of airline stocks and shares because of this. They cannot regulate one of their biggest expenses (fuel) and an act of terrorism can significantly harm the industry.

Why are luxury cruise stocks any better? Rising fuel expenses as well as Hurricane Katrina resulted in lower stock rates for companies like Carnival Corporation and Royal Caribbean Cruises Ltd. These two cruise companies account for about 75 percent of the cruise industry, around the world.

When George Allen Smith IV, out of Connecticut, disappeared when on a Royal Caribbean cruise, the industry received lots of damaging press.

Certainly, you'll find many negative aspects for cruise stocks and shares, but some stock investors are bullish. Initially, there is no direct indication that the vanishing honeymooner out of Connecticut has hurt ticket prices. Values on these stocks and shares also look excellent.

Carnival Corporation trades at sixteen times estimated 2006 earnings. Its historic range is ten to 30 times earnings. Royal Caribbean trades at 14 times projected '06 earnings. Its historic range is five to twenty four times earnings. Growth potential is strong as only 4 percent of Americans have ever taken a cruise.

When thinking about cruise stocks, remember the potential for loss. A sharp surge in fuel rates or one more terrorist attack would likely have a damaging effect on cruise stocks.

If you're undecided about this investment, do you know how to short a stock? This might be a better option for you, especially if you're encountering corporate debt restructuring.

I think the risk outweighs the achievable reward as I do not anticipate cruise lines to considerably outperform the broader market.

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