Cruise Line Stocks - How to invest in them?

February 22, 2021 15:25 UTC
Reading time: 21 minutes

The travel and tourism industry is one of the largest sectors of the world economy, and the services of this industry are familiar to many people because they have used them in one form or another. Cruises are one of the most exciting divisions of this industry and definitely attract the attention not only of tourists but also of many investors interested in cruise line stocks.

Want to take advantage of the potential rise of the largest cruise companies? Then you’re in the right place!

Let's not waste any more time. Let’s begin!

cruise line stocks invest

 

Cruise line stocks - What is a cruise company?

A cruise company is a company that transports tourists by river, sea or ocean using cruise ships. These companies differ from ordinary travel companies in that they include many services other than transportation.

Among cruise companies, some are direct descendants of traditional passenger lines, while others were created after the 1960s specifically for cruises.

As cruise companies are part of the global travel and tourism industry, they compete not only with each other but also with land-based hotels and resorts. However, one of the main advantages of cruises is that they can offer multiple destinations in one trip, while land hotels can’t.

A study from 2019, covering 185 countries and 25 regions of the world, revealed that the economic sector Travel and Tourism accounts for 10.3% of global gross domestic product, 330 million jobs and 10.4% of total employment. Cruise companies also contribute to all this.

In 2020, however, the sector proved to be one of the hardest hit by the global Covid-19 pandemic, leading to a fall in cruise line stock prices. It was this decline that attracted the attention of many investors

Cruise line stocks - Types of cruise companies

According to the quality and price of their product, cruise companies are classified into 4 different types:

  • Cheap - Prices range from $50 to $300 per day, routes from 3 to 10 days.
  • Budget - Prices range from $200 to $500 per day, and can last from 3 to 17 days.
  • Luxury - Prices are higher than the previous two types, but their services are not yet all-inclusive.
  • All-inclusive - These are the companies with the best product in the industry and with much higher prices.

However, a company may not operate in only one of these segments but may own ships in several of them. Large cruise companies own dozens, and in some cases can reach hundreds of ships, in different classes.

Cruise line stocks - Which are the largest cruise companies in the world?

The list of the three largest cruise companies offering cruise ship stocks includes:

  • Carnival Corporation 
  • Royal Caribbean Group 
  • Norwegian Cruise Line

Let's look at each of them in a little more detail.

Carnival

The undisputed leader in the cruise line industry is Carnival. The company has:

  • Over 100 ships (25 in its main brand Carnival)
  • Over 230,000 berths, which is about half of the world's cruise ship capacity
  • Brands such as Princess Cruises, Holland America and the ultra-luxury Seabourn

In the following image you can find a chart of the Carnival Cruise stock price:

carnival weekly chart

Source: Admiral Markets, MetaTrader 5, Carnival, Weekly chart. Data range: April 14, 2013, to February 1, 2021. Prepared on February 1, 2021, at 8:25 p.m. Please note that past performance does not guarantee future results

Royal Caribbean

In second place among cruise companies is Royal Caribbean, which has:

  • About 50 ships
  • Approximately 124,000 beds
  • Brands like Celebrity and Azamara Club

The chart below is of Royal Caribbean shares:

royal caribbean weekly chart

Source: Admiral Markets, MetaTrader 5, Royal Caribbean, Weekly Chart. Data Range: April 14, 2013, to February 1, 2021. Prepared on February 1, 2021, at 8:33 p.m. Please note that past performance does not guarantee future results

Norwegian Cruise Line

The Norwegian Cruise Line is third in this ranking with:

  • 25 ships
  • About 50,000 beds
  • Brands like Oceana and Seven Seas

norwegian cruise line weekly chart

Source: Admiral Markets, MetaTrader 5, Norwegian Cruise Line, Weekly Chart. Data Range: April 14, 2013, to February 1, 2021. Done on February 1, 2021, at 8:37 p.m. Please note that past performance does not guarantee future results

You can test-trade cruise line stocks without risking equity with a demo account from Admiral Markets. Get your free demo account today by clicking on the banner below:

Free Forex Demo Trading Account

Cruise line stocks - What is the business of a cruise company?

Now that you know who the major players in the cruise industry are, let's see exactly what their business is.

Here are the main sources of revenue for cruise companies:

  • Approximately 70% of the revenue of these companies comes from ticket sales
  • The rest is from products and services offered onboard such as food, drinks, short trips, casinos, etc.

Like most other holiday businesses, cruise demand is also seasonal and concentrated mainly during the summer months. At the same time, about 50% of the demand for cruises comes from the United States, which makes the country key to the development of the entire industry.

According to a strategic report by Carnival Cruise Line, two demographic groups are key to the long-term growth of the industry: people close to retirement and those born in the 80s and 90s.

The business of cruise companies is volatile. Ships are huge capital investments with very high operating costs and even a slight drop in reservations can easily take a company out of business. Cruise lines often sell, renovate or simply rename their ships just to keep up with travel trends.

One of the key challenges for any cruise business involves taking the right approach to expanding its fleet. This problem is complicated by the fact that it takes several years and a lot of capital to deliver a new ship.

Conditions in the industry can change significantly during this time and:

  • A cruise company that overestimates demand will have to reduce ticket prices and services to keep ships close to capacity.
  • A cruise company that underestimates demand will have to turn customers away, thus losing all the revenue that would come from them

As in most other businesses, balanced management can be key to long-term prospects through cruise companies.

Why invest in cruise line stocks?

People make investments for all sorts of reasons, such as building a long-term fortune, paying for a child's education, generating capital for their own business, planning retirement, achieving other financial goals, or simply increasing disposable income.

The reasons to focus on investing in cruise stocks can be many, but here I’ll note the main ones:

  • Almost zero interest rates on bank deposits
  • Inflation that seriously exceeds interest rates on deposits (protection against inflation)
  • Ongoing programs to stimulate the world's economies, which increase the money supply and inflationary pressures
  • Historically low share prices of companies in this industry after the Coronavirus pandemic
  • Opportunities for capital gains and achievement of financial goals
  • Opportunities to build a flow of passive profitability by receiving dividends
  • Opportunity to diversify a portfolio of assets
  • Very high asset liquidity (you can buy and sell your assets in seconds)
  • Due to the high liquidity, you can take advantage of low investment costs (spreads and commissions)
  • Low initial investment (with an Invest.MT5 account from Admiral Markets the minimum deposit is only €1)

It is important to note that before the outbreak of the Coronavirus pandemic in early 2020, the global Travel and Tourism sector had been outpacing the growth of the global economy for 9 consecutive years (see chart below):

travel and tourism gdp growth

Source: World Travel & Tourism Council

Risks when investing in cruise line stocks

Cruises, like any other holiday activity, are highly dependent on overall economic growth. Like any other non-essential purchase, the consumer can opt-out of a cruise in more difficult economic times.

Therefore, the cruise line stocks tend to perform well during economic growth and weakly during periods when growth slows or in an economic recession. Thus, when investing in cruise line stocks, you are likely also predicting strong economic performance.

Cruise giants have slightly more flexibility than regional land hotels, as they can move vessels to areas of the world whose economies are growing faster. However, they are still exposed to economic downturns, especially in the United States, where most cruise companies operate.

Other risks include:

  • Severe weather conditions. Cruise companies are vulnerable to extreme weather events such as hurricanes, which can disrupt their cruises or damage ships and passengers.
  • Oil prices. Fuel costs make up a significant part of the total cost of a cruise and this means that cruise companies are subject to large fluctuations in fuel prices, just like airlines.
  • Potential high volatility in cruise line stock prices

How much capital to spend investing in cruise line stocks?

The answer to this question depends mainly on three personal factors:

  • Personal opportunities
  • Personal financial goals
  • Personal tolerance for risk

Personal opportunities can be very individual for different investors and, therefore, it’s not possible to determine one exact amount for every investor to start with.

You can look at the investment horizon or the time for which funds can be set aside without needing them. This will depend on whether you focus on short-term investments or long-term ones. Cumulative investment (a certain amount each month, for example) can make a seemingly small return look serious when it comes to longer periods of time.

At the same time, start identifying your financial goals. What will you need in the future? You may want to buy a house or a car, finance your child's education, plan vacations abroad, start or develop a business or a new venture, or just have enough money when you retire.

The answers to these questions will give you an idea of ​​your financial goals.

The next aspect you need to consider is your risk tolerance, or your ability to take risks. This depends on factors such as current income, savings, expenses, financial obligations, adequate financial coverage for life and health and, last but not least, your own temperament.

Both extended deadlines and higher rates of return could give you similar results. This makes different investments interesting and suitable for different purposes.

How to invest in cruise line stocks?

It’s good to remember that, to invest in cruise companies, you need to have the right tools and competitive conditions. But, let's see which trading and investment tools you can use.

The first step is to open a real account with a regulated investment broker such as Admiral Markets. You will then need to download a financial market trading platform that gives you access to cruise line stocks. Admiral Markets offers the world's number one platform for trading multiple assets - MetaTrader 5.

Start trading in cruise ship stocks on the world's number 1 platform for trading multiple assets - MetaTrader 5. Download MetaTrader 5 now, completely free, by clicking on the banner below.

Trade With MetaTrader 5

Once you have a broker and a trading and investment platform, it’s time to look at the various financial instruments that can allow you to get exposure with cruise line stocks:

  • Cruise line stocks
  • Contracts for difference (CFDs) of shares of cruise companies
  • Exchange Traded Funds (ETFs) that invest in cruise companies

Each of these opportunities has its advantages and disadvantages and each investor must individually choose the right tools for themself, taking into account their personal capabilities, personal financial goals and risk tolerance.

Now, let's take a closer look at what the above three investment opportunities are for cruise companies.

Cruise line stocks

A stock is a variable-yield security that allows you to own a stake in a company. A share is a unit owned by a company.

For example, if a company has issued 100 stocks and you have bought 10 stocks of that company, then you own 10% of it. Holding stocks can give you (but not always) any of the following rights:

  • Right to dividend
  • Right to vote at the general meeting
  • Right to liquidation share

Most companies issue and sell stocks to raise more capital to finance their activities.

Advantages of investments and trading in real cruise line stocks:

  • Real possession of the base with all associated property rights
  • Less risk due to lack of leverage
  • No swap fees to keep the position open at night
  • More stable regulation

At the same time, the disadvantages of investment and trading in real cruise line stocks compared to trading in CFDs of shares are:

  • Lack of opportunity to open short positions
  • Lack of opportunity to use leverage
  • Availability of fees and commissions for purchase and sale
  • Lack of opportunities to trade in many different markets

Whether you are focusing on stock trading in CFDs or trading real cruise line stocks, it is a good idea to focus on a regulated broker, such as Admiral Markets.

CFDs on cruise line stocks

A Contract for Difference, or CFD, is concluded between a trader and a broker to exchange the difference in the price of an asset. This contract is active until it is closed by the trader, and payments under it are through a broker, instead of the actual delivery of the traded asset.

In practice, Contracts for Difference provide investors with almost all the advantages of real investment in financial instruments, but without actually owning them.

Let's first note the advantages of trading Contracts for Difference:

  • Short sales. One of the main advantages of today's CFD trading lies in the possibility of short positions. In this way, you can potentially benefit from both rising and falling markets.
  • Use of leverage. CFDs allow you to manage a larger amount than you have in your trading account. This happens through the use of leverage.
  • Opportunity for transactions throughout the day. CFDs allow traders to take advantage of short-term price movements in the stock, index or commodity markets.
  • Easy access to global markets. Easy access to many financial instruments, such as stocks, bonds, currencies, commodities, cryptocurrencies, etc. through an intermediary of your choice.
  • In CFD trading with Admiral Markets there are often no fees and commissions for opening and closing positions.
  • Numerous trading styles are available (at least for some brokers, such as Admiral Markets).

Like any investment, CFDs have their drawbacks:

  • There is no possession of the underlying asset, with which there are no property rights in case of bankruptcy of the company.
  • CFDs may be a less regulated product.
  • The leverage effect can be a double-edged sword. This means that in addition to increasing potential profits, the financial lever also increases potential losses.
  • Swap fees to hold the position at night.

Trade CFDs on the largest cruise line stocks now, with no commissions. Click on the banner below and start today!

Trade Forex & CFDs

Investing in cruise line stocks with ETFs (Exchange Traded Funds)

An ETF is a basket of securities that you can buy and sell on the relevant stock exchanges through a financial intermediary (broker).

These funds can be invested in many different asset classes (stocks, bonds, indices, commodities, currencies, etc.). Many different Exchange Traded Funds invest in shares of companies in the tourism sector, including shares of cruise companies.

The advantages of investing in ETFs:

  • Lower costs because you can buy a basket of shares instead of just one
  • Direct portfolio diversification
  • Tax efficiency (for example, actively managed mutual funds often buy and sell assets that generate taxable capital gains, which isn’t the case with ETFs)

Disadvantages include:

  • In some cases, ETFs may have lower liquidity than equities
  • There may be some discrepancies with the underlying asset that follows the fund

There is no right or wrong tool to start investing in cruise line stocks. You just have to choose the most suitable for your trading and investment style.

One example of an ETF that invests in cruise line stocks is the Vanguard Consumer Discretionary ETF (#VCR). Of course, there are many other companies in the consumer discretion in this ETF. Below you can find the chart of the CFD of this exchange traded fund:

Vanguard consumer discretionary etf cfd

Source: Admiral Markets, MetaTrader 5, Norwegian Cruise Line, Weekly chart. Data range: June 24, 2019, to February 1, 2021. Prepared on February 1, 2021, at 9:19 p.m. Please note that past performance does not guarantee future results

How to choose the best cruise line stocks

To choose the right cruise line stocks to invest in, it’s good for investors to track several indicators that will help them gain a better idea of ​​a company's business.

Here are some indicators that can be useful when investing in cruise line stocks:

  • Yield on net income. This indicator describes the change in the income of the average room per day, after removing the effect of changes in the exchange rate. It includes any change in employment levels, ticket prices and onboard costs.
  • Capacity expansion. Net income profitability is combined with capacity expansion to see, essentially, the company's full growth potential.
  • Net cruise costs. This indicator includes the cost of everything needed from food through labour to security. It is often reported with or without fuel costs and helps investors understand how profitable a cruise company is and whether its profits increase or decrease over time.
  • Return on invested capital. This is a key measure of the efficiency of any business. As cruise companies need to invest heavily in long-term investments, such as new ships and improvements to old ones, this indicator is crucial.
  • Debt. The business of cruise companies requires serious capital, which means that participants in this industry often carry with them high debts. If these liabilities become too high, then profits may suffer under the weight of high-interest costs.
  • Dividend yield. Most cruise companies pay stable dividends. The dividend yield ratio refers to the share price/dividend ratio.

There are other indicators that investors should monitor before buying cruise line stocks, but the ones listed above are some of the most important.

Start trading cruise line stocks on the number 1 platform in the world for trading in multiple assets - MetaTrader 5, provided by Admiral Markets. Download your MetaTrader 5 now, completely free by clicking on the banner below:

Trade With MetaTrader 5

How to start trading cruise line stocks?

Once you know what a cruise company is, what the business is, why you should invest in cruise line stocks what are the risks, as well as how to invest in these companies, it's time to move on to the more interesting practical part - to make your purchase of cruise line stocks.

You can do this in just three steps:

  1. Open a trading account.
  2. Download your trading platform.
  3. Open a New Order window and make your first deal!

For more information on how to open a stock trading account with Admiral Markets, watch the following short video:

Let's give an example of how to buy cruise line stocks using CFDs on Carnival Cruise Lines. Similarly, you can open a short position in stocks.

How to buy shares?

  1. Log in to your account with Admiral Markets (MT4/MT5/WebTrader/Mobile application)
  2. Go to Market Condition
  3. Look for Carnival stock (#CCL)
  4. Right-click on the stock and then select "Chart Window"
  5. Once the graphic appears, click on the "New Order" button (in the Toolbar below the menu)
  6. Select the number of lots in the Volume field, as well as the stop loss and take profit levels, if you want to place these
  7. Click on the blue "Buy on Market" button

When you buy (long position) in Carnival stock, you expect it to rise so that you can make a potential profit from your deal.

How to sell shares?

  1. Log in to your account with Admiral Markets (MT4/MT5/WebTrader/Mobile application)
  2. Go to Market Condition
  3. Look for Carnival stock (#CCL)
  4. Right-click on the stock and then select "Chart Window"
  5. Once the graphic appears, click on the "New Order" button (in the Toolbar below the menu)
  6. Select the number of lots in the Volume field, as well as the stop loss and take profit levels, if you want to place these
  7. Click on the red "Market Sale" button

When you sell (short position) in Carnival stock, you expect it to fall in price so that you can make a potential profit from your deal.

About Admiral Markets

We are a broker with a global presence and are authorized and regulated by financial regulators such as the Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC) and the Australian Securities and Investments Commission (ASIC). We provide access to over 8,000 financial trading instruments such as Forex & CFDs on stocks, indices, bonds, commodities, ETFs and cryptocurrencies, as well as investment opportunities in real stocks and ETFs.

With Admiral Markets you can use innovative trading platforms such as MetaTrader 4 and MetaTrader 5, MetaTrader Supreme Edition, as well as the exclusive Premium Analytics portal free of charge.

Get instant, free access to our Premium Analytics portal with market news, technical analysis, economic calendar and global market sentiment indicators gathered from over a thousand financial media sources. Just click on this banner:

the ultimate trading analytics portal

Find more interesting articles:

 

INFORMATION FOR ANALYTICAL MATERIALS:

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
  3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  4. The Analysis is prepared by an independent analyst, NAME +(Position), (hereinafter “Author”) based on their personal estimations.
  5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
  6. Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
Avatar-Admirals
Admirals
An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.