After considering a few starting lines for this analysis, I decided to let Peter Lynch do that for me. In his book One Up On Wall Street, Lynch said:
Absent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they are going to be higher or lower in two to three years, you might as well flip a coin to decide.
This timeless advice has already served many investors to stay objective during severe market downturns. With the outbreak of COVID-19, investors are once again losing their cool and thumping travel and leisure sector stocks as if there's going to be no tomorrow. Save for a handful of investors, many are focused on predicting what would happen to the stock of a certain company in the next couple of months, let alone "two to three years".
The case with Carnival Corporation & plc (NYSE:CCL) is an extreme scenario. The leader of the global cruise industry that was expected to deliver stellar numbers just a few months ago is now thought of as a company that would most certainly file for Chapter 11. This pessimism has sent the shares on a free fall.
The numbers tell a different story, however. My analysis reveals that there hasn't been a better time to buy Carnival shares in the recent past.
Learning from previous market routs
For investors, there's a lot to learn from history books. Whenever there's a market crash, investors naturally think of two events that wiped billions of dollars off markets; the dotcom bubble and the financial crisis. Not surprisingly, some invaluable lessons can be learned by studying these two catastrophic events.
Leading up to the dotcom bubble in 2000, shares of tech companies reached record highs. A crash was imminent in the eyes of legendary investors
