Gordon Pape often looks for strong sectors and then finds the best stocks within that group. David Fried looks at share buybacks, and Beth Gaston uses technical and contrary sentiment analysis. Despite these various approaches, all three like Carnival Corp.
(For more information on the advisors cited below, please click on their photos.)
"Over the last 20 years, cruise
lines have invented a new type of vacation by making the ship, rather than the
destination, the highlight of the trip," says Gordon Pape in the Internet Wealth
Builder . "We now have 145,000-ton
ships, with cabin capacity for 3,000 people, fully equipped with gambling
casinos, spas, rock climbing facilities, even ice skating rinks. And North
Americans are clamoring for more. In 1970, there were four cruise ships afloat;
today there are 142 in service and seven on order. The industry estimates that
more than 10 million people will cruise this year compared to 7.4 million in
2002. A recent industry survey showed that only 11% of North Americans have
ever set sail and cruising still attracts only 2% of the entire leisure travel
business. There is enormous growth potential.The company that I most prefer is
Carnival Corp. (CCL NYSE),
which pays a 50 cent dividend to yield 1.1%. Carnival is the pre-eminent cruise
line company and operates through 12 brand-name subsidiaries that include
Holland America, Princess, and Cunard. Following a merger with P&O last
year, CCL now has 75 ships with more than 123,000 berths in service and offers a
full range of cruises from short, moderately-priced trips to lavish extended
voyages. Revenues of $8.8 billion are expected this year with a 10% jump to the
$10 billion range in 2005. This is a company on the move. The Queen Mary 2 has
just entered service and CCL plans to add two or three large ships to its fleet
each year in the future. We look for earnings of about $2.25 a share in 2004, up
from $1.66 last year, and $2.75 in 2005. Buy CCL with a target of
$53."
"Carnival is the only entity in the world to be included in both
the S&P 500 and the FTSE (one of the most widely used stock market indices
in the UK)," notes David Fried, editor of The
Buyback Letter. "As one of the leading
cruise operators in North America, Europe and Australia, Carnival has 12
distinct brands -- Carnival Cruise Lines, Holland America Line, Princess
Cruises, Seabourn Cruise Line, Windstar Cruises, AIDA Costa Cruises, Cunard
Line, P&O Cruises, Ocean Village, Swan Hellenic, and P&O Cruises
Australia. These brands operate 77 ships totaling more than 128,000 berths, with
nine new ships scheduled for delivery between November 2004 and December 2006.
Carnival also operates the leading tour companies in Alaska and the Canadian
Yukon -- Holland America Tours and Princess Tours. And if that isn't enough, the
company also makes money from other onboard activities and services such as
casino gaming, bar sales, gift shop sales, entertainment arcades, shore
excursions, art auctions, photo sales, spa services, bingo games and lottery
tickets, video diaries, snorkel equipment rentals, Internet and telephone usage,
vacation protection programs and promotional advertising by merchants located in
its ports of call. For the six months ended 5/31/04, revenues rose 78% to $4.24
billion. Net income totaled $535 million, up from $255 million. Earnings reflect
improved operating margins. Carnival has repurchased 5% of its shares
outstanding over the past year."
"Carnival Cruise Lines recently sailed into the earnings
confessional to announce third-quarter results," notes Beth
Gaston, analyst with Schaeffer Investment
Research. "The firm collected $1.23 during the reporting period, up from 90 cents one
year ago. Revenue surged nearly 30%to $3.25 billion. Looking forward to the next
quarter, CCL thinks Hurricane Frances resulted in a per-share earnings loss of three
to four cents, while the relocation of the Cunard line's North
American organization will cost the firm one to two cents in the
fourth quarter, bringing total fourth-quarter earnings to 30-32 cents per share.
CCL has rallied to a new high today, overtaking short-term resistance at the
48 level. CCL has been an impressive name in this relatively stagnant market,
enjoying an uptrend since the first quarter of 2003. The equity's open interest
ratio has been on the rise since hitting a short-term bottom in mid-July.
Turning to other sentiment factors, a note of pessimism is evidenced by
the 15 million CCL shares sold short, which amounts to a short-interest ratio of
7.5 days to cover. If CCL continues to explore new annual-high territory,
some of these bearish investors may scramble to cover their positions, thereby
providing the equity with an added boost."
