Cruise Stocks: Risk And Profit Analysis

Stock investors know that oil prices, terrorism, and corporate debt restructuring, factors that truly can't be controlled, have a large influence on the stock market. Lots of investors avoid airline stocks for this reason. They cannot control one of their greatest expenses (fuel) and an act of terrorism can seriously damage the market.

Why are cruise stocks any better? Rising fuel costs and Hurricane Katrina resulted in lower stock prices for organizations like Carnival Corporation and Royal Caribbean Cruises Ltd. These two cruise lines account for about 75 % of the cruise industry, worldwide.

When George Allen Smith IV, from Connecticut, disappeared while on a Royal Caribbean cruise, the market received plenty of negative publicity.

Surely, you will find many negatives for cruise stocks, but some stock investors are bullish. First, there's no direct indicator that the vanishing honeymooner from Connecticut has damaged ticket prices. Valuations on these stocks also look excellent.

Carnival Corporation trades at 16 times projected 2006 earnings. Its historic range is 10 to thirty times earnings. Royal Caribbean trades at 14 times estimated 2006 earnings. Its historic range is five to 24 times earnings. Growth potential is good as only 4 percent of Americans have ever taken a cruise.

When considering cruise stocks and shares, remember the risks. A sharp rise in fuel rates or another terrorist strike would likely have a negative impact on cruise stocks and shares.

If you're unsure of this investment, do you know how to short a stock? This may be a better route for you, specifically if you're experiencing corporate debt restructuring.

In my opinion the risk exceeds the possible reward as I don't expect cruise lines to considerably outperform the broader market.

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