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Cruise Stocks And Shares: Risk Versus Profit Analysis
Traders know that oil costs, terrorism, and corporate debt restructuring, areas that really cannot be controlled, have a huge influence on the stock market. Many investors stay away from airline stocks for that reason. They cannot regulate one of their biggest expenses (fuel) and an act of terrorism can severely harm the industry.
Why are travel stocks any better? Rising fuel costs along with Hurricane Katrina resulted in lower stock rates for businesses like Carnival Corporation and Royal Caribbean Cruises Ltd. Those two cruise companies account for about 75 percent of the cruise market, worldwide.
When George Allen Smith IV, out of Connecticut, disappeared when on a Royal Caribbean cruise, the industry received lots of unfavorable press.
Certainly, there are actually many negatives for cruise stocks and shares, but some traders are bullish. Initially, there isn't any direct indication that the disappearing honeymooner out of Connecticut has hurt ticket costs. Valuations on these stocks and shares also look excellent.
Carnival Corporation trades at sixteen times estimated 2006 profits. Its historic range is ten to 30 times earnings. Royal Caribbean trades at fourteen times estimated '06 earnings. Its historic range is five 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, don't forget the risks. A sharp boost in fuel costs or one more terrorist assault would likely have a harmful effect on cruise stocks.
If you are unsure of this investment, do you know how to short a stock? This could be a better option for you, particularly if you're encountering corporate debt restructuring.
I think the risk outweighs the probable reward as I don't anticipate cruise lines to considerably outperform the broader market.
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