An article from Lauren Adams of the Center for Financial Planning entitled Three Reasons to Own Individual Stocks in an Efficient Markets was recently published on the Advisors Perspectives website. In the report, the author explains why focusing on individual stocks, rather than simply buying low-cost index funds or other stock portfolios, makes a lot of sense in today’s market. In order to help identify opportunities in individual stocks, Advisors in Focus (via TrackStarIQ data) is continually scanning for the tickers that are seeing the most interest and pageviews from financial advisors and retail investors.
For example, shares of the cruise ship operators—Carnival Cruise (CCL), Royal Caribbean (RCL), and Norwegian Cruise Line Holdings (NCLH)—are back under fire as the pandemic in the United States shows no signs of slowing. Stocks in the sector staged impressive rebounds after tumbling through February and the first half of March, gaining an average of 90% since March 18th. Still, shares of the cruise ship companies are a far cry from levels seen at the start of the year, with drastically discounted share prices. Now, financial advisors appear to be actively searching for insights into the sector to determine if recent losses present long-term buying opportunities.
Although cruise ships have rallied sharply off March lows, the group has been trending lower in the second half of July after the Centers For Disease Control and Prevention on July 16th extended a ban on cruise sailing in the United States. CCL is down 21.1% since that time, RCL is off 27.7%, and NCLH lost 17.7%.
The group has been hit with a wave of analyst downgrades recently as well. For example, HSBC lowered Carnival Cruise to hold on 7/21, Macquarie downgraded Royal Caribbean to Neutral on 7/14, and Norwegian was reduced to hold at SunTrust on 7/14.
Given the extent of the losses in the sector—not to mention that RCL and CCL continue to pay hefty dividends—investors are likely wondering if the recent weakness is another opportunity to buy shares. After all, the cruise ship companies could see a dramatic rebound from depressed valuations once the pandemic wanes and operations are normalized.
| Cruise Ship Industry Pros | Cruise Ship Industry Cons |
|---|---|
| Ability to deploy assets quickly once customer demand resumes | Weakness in consumer spending and waning consumer demand |
| Falling fuel prices helping profit margins | Lackluster consumer demand could trigger further weakness in prices |
| Share prices have dropped sharply, creating more compelling valuations | Dividends (CCL and RCL) could be at risk if industry weakness persists |
| Successful vaccine-development could give lift shares sooner rather than later | COVID-19 could continue longer than anticipated and extend no-sail orders |
Financial advisors working for some of the largest firms appear to be on board the idea that the cruise ship companies could be one of the most interesting sectors once the virus is contained. According to TrackStarIQ data, there has been steady engagement in Carnival Cruise during the rise and fall of shares over the past month. RCL and NCLH are among the tickers seeing steady pageviews as well.
The bottom line is that, while a recovery in Carnival Cruise and the other operators is probably miles away, the discounted share prices seem to have caught the interest of the smart money crowd, and motivated increased engagement from investors seeking long-term opportunities.