Luxury Cruise Shares: Risk And Profit Evaluation

Stock investors know that oil prices, terrorism, and corporate debt restructuring, areas that seriously cannot be controlled, have a substantial influence on the stock market. Many investors avoid airline stocks for this reason. They cannot control one of their greatest expenses (gas) and an act of terrorism can severely harm the industry.

Why are cruise stocks any better? Rising fuel costs and Hurricane Katrina resulted in lower stock prices for businesses like Carnival Corporation as well as Royal Caribbean Cruises Ltd. Those two cruise companies account for about 75 percent of the cruise industry, worldwide.

When George Allen Smith IV, from Connecticut, disappeared while on a Royal Caribbean cruise, the market received loads of unfavorable press.

Certainly, you will find many negatives for cruise stocks, but some stock investors are bullish. First, there isn't any direct signal that the disappearing honeymooner out of Connecticut has hurt ticket prices. Valuations on these stocks also look excellent.

Carnival Corporation trades at 16 times projected '06 profits. Its historic range is ten to 30 times earnings. Royal Caribbean trades at 14 times estimated 2006 earnings. Its historic range is five to 24 times earnings. Growth potential is solid as only 4 % of Americans have ever gone on a cruise.

When thinking about cruise stocks, remember the risks. A sharp rise in fuel rates or another terrorist assault would most likely have a harmful influence on cruise stocks.

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

I believe the risk outweighs the possible reward as I don't expect cruise lines to considerably outperform the broader market.

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