Investing in cruise ship stocks
The pandemic battered cruise line stocks. Here's how to buy a possible comeback.
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Prior to 2020, the tide was picking up for cruise ship stocks as the industry saw substantial gains. But no-sail mandates sparked by COVID-19 brought it down. Cruise ship stocks remain in turbulent waters as uncertainty over the coronavirus lingers. But the industry may make a comeback as healthcare experts work with it to lay a framework for a safe return to the sea.
What are cruise ship stocks?
Cruise ship stocks are stocks of companies that run cruise ships and transport passengers to their destinations while offering comfort and entertainment along the way.
Estimated to be valued at $US 23.8 billion in 2021, the global cruise ship industry includes more than 270 ships powered by more than 50 cruise lines.
But three companies own about 75% of the market share: Royal Caribbean, Carnival and Norwegian. The first two pay dividends to shareholders.
How to invest in the cruise ship sector
There are several ways you can get your feet wet with cruise line investing in Australia. You can buy shares of individual cruise stocks. Or you can purchase shares of an ETF that invests in multiple cruise ship stocks and possibly other stocks in the travel industry. Here’s how to start:
- Choose a stock trading platform. You have plenty of brokers to choose from in Australia, so be sure to compare your options to find the one that works best for you.
- Open your account. Be ready with your ID and bank account information.
- Fund your account. You’ll need to transfer money to your brokerage account before you can start investing. Some platforms let you start with as little as $1.
- Search for stocks. Look up stocks by ticker symbol or use a stock screener to filter the types you’re interested in.
- Place an order. Once you’ve found an investment you want, specify how much of it you wish to purchase and submit your order.
- Monitor your investments. Track the performance of your portfolio by logging on to your account.
What ETFs track the Cruise Ship sector?
You can also invest in ETFs that hold cruise ship stocks along with equities from companies in other industries. Here are some to consider:
- The First Trust Consumer Discretionary AlphaDEX Fund (FXD)
- Invesco S&P 500 Equal Weight Consumer Discretionary ETF (RCD)
- Invesco S&P 500 High Beta ETF (SPHB)
- Pacer Lunt Large Cap Alternator ETF (ALTL)
- ProShares Equities for Rising Rates ETF (EQRR)
- VanEck Vectors Africa Index ETF (AFK)
- SPDR S&P 500 ETF Trust (SPY)
- iShares Core S&P 500 ETF (IVV)
- Vanguard Mid-Cap ETF (VO)
- Vanguard S&P 500 ETF (VOO)
Why invest in the cruise ship sector?
Cruise stocks can surge in strong economies when people have more disposable income to travel. In fact, the cruise ship business was becoming the fastest-growing sector in the travel industry a few years before 2020.
In 2018, the global cruise ship industry was valued at about $US 150 billion. In 2019, it generated $US 5.5 billion in economic activity in the US alone, marking a 5.3% increase from 2018, according to the Cruise Lines International Association (CLIA), which represents most of the globe's cruise ship companies.
This was fueled by a spike in people looking to take cruise vacations. In 2019, more than 1.37 million people boarded cruise ships that took off from US ports. That translated to an 8% increase from 2018 and a 26% increase from five years prior.
But downturns in the global economy and the wider travel industry can cause cruise stocks to take a major plunge.
What unique risks does the cruise ship sector face?
The cruise ship industry is interconnected with a wide variety of different industries and sectors that help keep it afloat. For instance, cruise ships need large amounts of fuel to operate. If volatility erupts in the energy sector and fuel prices rise, it may take a toll on the earnings of cruise line companies. Here are examples of other sectors that can affect cruise ship stocks.
- Food and beverage
- Hospitality and leisure
- Arts and entertainment
- Finance and insurance
And of course, travel restrictions can mean fewer people on cruise ships and less money in the pockets of the cruise companies. This is evident now in the midst of the COVID-19 fog.
COVID-19 has taken a toll on a broad range of businesses across the globe, one of the hardest-hit sectors has been the cruise line industry. Each of the three largest cruise ship operators saw sales sink by at least 65% for the first nine months of 2020.
Nonetheless, the cruise ship industry is slowly getting back on its feet. Cruise stocks may begin to recover their previous highs as safety measures are put into place and news surrounding a COVID vaccine develops, but it will have a long way to travel.
Compare trading platforms
To invest, you’ll need a brokerage account in Australia. Explore your options below.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Cruise ship stocks are swimming through rough waters after enjoying the high seas. The sector took a major hit from COVID-19, but evidence suggests the industry is working diligently with healthcare professionals to recover. The extent to which it recovers, if at all, is uncertain.
Depending on the type of investor you are, this may look like an immense risk or an opportunity. It’s important to do your due diligence and carefully analyze cruise ship stocks and your own risk tolerance before investing.
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