Calm Seas Ahead for Cruising Stocks

I just got back from my first cruise. It was on Carnival lines (CCL) and left from southern California and went to three ports in Mexico, Puerto Vallarta, Mazatlan, and Cabo San Lucas.

Because I am susceptible to motion sickness, I had to take prescription patches called Transderm-Scop, made by Novartis AG (NVS), which trades on the New York Stock Exchange. I also had to combine that with Dramamine, formerly distributed by Pfizer (PFE), now added to the product line of Johnson + Johnson (JNJ) as part of the Pfizer Consumer Healthcare acquisition.

These are just a few stock opportunities to climb on board the cruising stock industry. Hopefully there won’t be choppy seas for these stocks, but will instead be a Bon Voyage. Here they are:

Carnival Corp.

Carnival is one of the largest cruise and vacation companies in the world. Its cruise lines which operate out of North America, the United Kingdom, Germany and Italy, include Carnival Cruise Lines, Holland America Line, Princess Cruises, Seabourn Cruise Line and Windstar Cruises in North America; AIDA in Germany; Costa Cruises in southern Europe; P&O Cruises, Cunard Line, Ocean Village and Swan Hellenic in the United Kingdom; and P&O Cruises in Australia.

It operates a fleet of 81 ships, and will be receiving another 20 ships between now and 2011. It is headquartered in Miami, Florida and London, England. P/E 16.5, P/S 3.3, yield 2.4%.

Carnival plc (CUK)

This is the ADR for the Carnival stock which trades on the London Exchange. Here is how this works. Carnival Corporation & Carnival plc operates under a dual listed company structure in which Carnival Corporation and Carnival plc operate as a single economic entity through contractual agreements between each of its own separate legal entities.

Shareholders of both Carnival Corporation and Carnival plc have the same voting participation and economic interest but its shares are listed on different stock exchanges and are not fungible. [Is this as clear as dirty water?] Carnival Corporation common stock is traded on the New York Stock Exchange under the symbol CCL. Carnival plc is traded on the London Stock Exchange under the symbol CCL and as an ADS on the New York Stock Exchange under the symbol CUK.

Carnival is the only company in the world to be included in both the S& P 500 index in the US and the FTSE 100 index in the UK. If you look at the graphs for the Corp. and the plc stocks, they seem to move together generally, however, the ADR has outperformed the Corporation stock by several percentage points.

Is there an arbitrage opportunity here? Anyway, because of the difference in price, the statistics are somewhat different: P/E 19.7, P/S 3.7, yield 2%.

Royal Caribbean Cruises Ltd. (RCL)

This company owns Royal Caribbean International [19 cruise ships with over 44,000 berths] and Celebrity Cruises [9 cruise ships with over 15,000 berths]. It also owns Pullmantur S.A., which has five ships in Europe and Latin America.

The company plans on having six more ships by the end of 2010. It also offers land tour vacations in Alaska, Canada and Europe. They are headquartered in Miami, Florida. P/E 14, P/S 1.7, yield 1.4%.

Royal Caribbean Cruises Ltd. Lehman ABS 8.875 Corporate Backed Trust Certificates, Series 2001-27 Trust (CWZ)

Here's an unusual investment. I wasn't sure if I should put this in the minibond category or the unusual trust category, or both [they are technically referred to as CORTS or corporate-backed trust securities]. This is a publicly traded trust created by Lehman Brothers (LEH).

The Trust's assets consist solely of senior debentures issued by Royal Caribbean Cruises Ltd. It pays dividends of $1.109 per share twice a year every April and October, similar to a bond. But it is traded on the New York Stock Exchange with a par value of $25, similar to a stock. The current yield is 8.6%.

Star Cruises Ltd. [SSKZF.PK]

This company, which is a speculative play, was founded in 1993 and operates in the Asia-Pacific region. It has 18 ships with over 23,000 berths which leave from ports in Singapore, Port Klang (Malaysia), Hong Kong and Keelung. Its brands include Star Cruises, Norwegian Cruise Line, and Orient Lines.

It is also a co-owner with Genting Berhad [GEBHY] of the Sentosa casino resort in Singapore.

Disclosure: Author does not have positions in any of the above.

CCL vs RCL vs CUK vs CWZ 1 yr-chart

Comments

[DanielJacome]

No one knows why the two trade at different prices -- they should theoretically trade at the same value given the similarity in economic rights for both sets of shares........