Financiers understand that oil prices and terrorism, 2 things that actually cannot be managed, have a big influence on the stock market. Numerous investors avoid airline stocks for this factor. They cannot control one of their most significant expenses (fuel) and an act of terrorism can seriously harm the market.
Why are cruise stocks any much better? Rising fuel expenses and Hurricane Katrina caused lower stock prices for business like Carnival Corp. and Royal Caribbean Cruises Ltd. These 2 cruise lines account for about 75 percent of the cruise market, worldwide.
When George Allen Smith IV, from Connecticut, vanished while on a Royal Caribbean cruise, the industry got a great deal of unfavorable promotion.
There are numerous negatives for cruise stocks, however some investors are bullish. First, there is no direct indication that the disappearing honeymooner from Connecticut has actually injured ticket prices. Valuations on these stocks also look excellent.
Carnival Corp. trades at 16 times estimated 2006 earnings; its historic range is 10 to 30 times earnings. Royal Caribbean trades at 14 times estimated 2006 earnings; its historical variety is 5 to 24 times earnings. Development potential is strong as just 4 percent of Americans have actually ever taken a cruise.
When thinking about cruise stocks, remember the threats. A sharp increase in fuel costs or another terrorist attack would likely have an unfavorable effect on cruise stocks. In my opinion the risk outweighs the possible reward as I don’t expect cruise lines to considerably surpass the more comprehensive market.
These 2 cruise lines account for about 75 percent of the cruise market, worldwide.
When thinking about cruise stocks, keep in mind the threats. A sharp rise in fuel rates or another terrorist attack would likely have a negative impact on cruise stocks.
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