Wednesday, September 13, 2006

Investing in the Cruise Line Industry

Carnival Corporation stock (NYSE: CCL) is the largest cruise line operator in the world. In the United States, it operates several different cruise lines including Carnival, Princess, and Holland America. A few years ago, Carnival merged with Princess, and there are actually two stock symbols for Carnival. CCL is the symbol that represents shares in the original Carnival Corp. The symbol CUK represents American Depositary Shares (ADS) of the original Princess Cruise Lines, and is called Carnival plc. Carnival has what is called a dual listing on the London and New York Stock Exchanges. This arrangement is confusing, even to me. Although the two stock symbols technically represent two separate companies, they have the same management, and for all intents and purposes the stock prices move in lockstep with one another. I have only ever invested in the CCL symbol stock. CCL closed on Wednesday at 43.85.

Carnival's biggest competitor is Royal Caribbean (NYSE: RCL) which includes Celebrity Cruises. I also own shares in RCL which closed on Wednesday at 38.00. The third major player in the US cruise market is Norwegian Cruise Lines. However, NCL is owned by the Genting Group of Malaysia (which also owns the Asian cruise line Star Cruises). It would be difficult for US residents to directly buy shares in Genting. Though, it is possible to buy and an Exchange Traded Fund (ETF) which holds shares in Genting. This fund is the iShares MSCI Malaysia Index (AMEX: EWM).

Admittedly the timing of this post might be a little late as the cruise industry has already started to rally. The price of fuel factors in as a key component of the latest price movements. In the graph below, Carnival (CCL) is represented by the blue line. The red line is the U.S. Oil Fund ETF (AMEX: USO). This is another ETF that tracks the price of crude oil. Over the past few weeks, you might have noticed that oil has dropped in price. This is evident if you noticed that you're paying a little bit less at the pump for gas. As you can see in the graph, the price of oil has dropped while the price of CCL has increased.

In addition to the recent upward movement of cruise line stocks, I will add some of my usual criteria for purchase of CCL & RCL. Both are profitable companies that pay a dividend.

There is one more bonus, if you are considering going on a cruise in the near future. Both CCL & RCL offer a Shareholder Benefit in the form of an onboard credit for booking a cruise. For example, each offers a $100 onboard credit for shareholders that book a 7 day cruise and a minimum of 100 shares.

Update: If you were searching for information about how to get the Shareholder Benefit offered to cruise line stock holders, please find the details in my post about cruise line shareholder benefits for RCCL and Carnival stock holders.


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