There comes a point in the history of a portfolio where it has to move past the safer bets and move on to picks that are outside of the normal channel or realm. We move to a point where bets are on and the market and humanity will guide our next move forward. That being the case, I’ve differed to the judgment of my grandparents.
I know this isn’t always the immediate gut reaction when it comes to investing but sometimes it’s a great move when you’re stuck on what to dip your portfolio into next. I have been feeling a bit jaded lately and that has spilled over into having very little to write about. This has also made it tough to think of companies to evaluate. That’s why I moved to the preference of a generation that is removed from my own to see from a different angle what I may not be seeing.
One could argue that I should have seen their answer coming but it was an immediate gut response from them that I should look at cruise lines. In the past I have hurried past these stocks as they seemed all to cyclical and as we are in an upswing, overpriced. Regardless, I paid them a look – Carnival, Royal, and Norwegian. All three stocks actually showed way more promise than I had initially thought. One clear winner however emerged from the pack. That winner was Royal Caribbean. Let me share why.
First off, all three companies run nearly the same business – cruise ships. Want to see the seas and visit places without taking an airplane to get there? It seems like an obvious second way to travel beyond trains (which we already have a company in – ARII). Royal on the other hand has much more promising numbers. While Carnival is technically speaking bigger, Royal has the biggest ships in the ocean currently available to tourists. In this industry, bigger is better. Passengers are locked up on a boat for days or weeks at a time and sometimes even months! When that is the case, the bigger you can make that boat, the better. Period – no questions about it. The bigger the boat, the more activities that can be fit into it while at sea.
In addition to the size of the boats, they also have a bigger debt load. While this is sometimes worse, in this case, it’s average across the industry to carry a large debt as ships can cost upwards of 1.5! This being the case, I’m not so worried about the debt or at least no more worried than I would be with any other ship carrier.
These large ships also serve as a home away from home for seniors who pay nearly the same cost in ships as they do in nursing home fees and I don’t know about you but I’d much rather be on a relaxing ship with activities than listening any longer to the same nurses in a home. Granted, I’m not to that stage in my life (and far from it!) but I always like to picture myself in the same predicament of opportunities when thinking of investing. Rack the points on and on then for a cruise line in the portfolio.
Pair this with the new expansion plans that will dip through China now that the Chinese have more funds they can use on frivolous activities you’ve got a greater stream of income. And when I say they are making a dip, I mean they are making a major push. Again however, the other cruise lines are aiming to do the very same as this is a major new source of income.
Overall however, I liked the prospects of Royal Caribbean much more than the others available. Size is king on the seas as long as Hollywood isn’t involved with Leo and Kate. They are bigger, more aggressive with expansion, and they have a steady master at the helm of the company. That’s why I’ve decided to invest in Royal Caribbean for my next stock pick. All discussion is welcome.
Summary of purchase:
Royal Caribbean - RCL - 11 shares @71.59/share - total: $797.58
Addition to annual dividend: $16.50