Your Week In Brief

It's Official: There Is No Reason to Ever Go On--Or Invest In--A Cruise Ship.

Gregory Bergman
    Feb 21, 2020 1:25 PM  PT
Your Week In Brief
author: Gregory Bergman   

I have been on a cruise once in my life, a short trip from Los Angeles to Rosarito, "Mexico"--which is basically San Diego with a lower household median income. The trip took four days and, while there were some unexpectedly fun highlights (decency and a solemn oath to my ex-wife do not permit me to expand on this); it was mostly dull, dumb, and downright confining. Four days was plenty; two weeks at sea--let alone on a docked ship--would be unthinkable. 

All Aboard the USS Coronavirus 

As the death toll from the virus hits 2,000, nearly 500 passengers were finally able to de-cruise from what was certainly an unexpectedly long journey. The Diamond Princess cruise ship, which had been quarantined in Tokyo since the outbreak of the coronavirus, allowed passengers to disembark this week. While none of them had shown any symptoms of the respiratory illness luckily, most passengers did say they had had just about enough unlimited hamburgers and Bud Light to last a lifetime. The cruise DJ, having just put on Daft Punk's "Get Lucky" on repeat a week before in a display of dark irony, was rumored to have checked his stock in Carnival Corporation & Plc (NYSE: CCL)-- the cruise lines' parent company--before throwing himself into the sea. (This rumor is unconfirmed). 

In confirmed news, a total of 621 people on board of the ship have tested positive for COVID-19. There were about 3,700 passengers and crew on the Diamond Princess before the quarantine. Sunday, more than 300 U.S. citizens and family members were evacuated from the ship. The nightmare continues, however, for some American passengers; the Center for Disease Control said that more than 100 U.S. citizens were still on the ship or in hospitals in Japan. Forest Grove, Oregon resident and chain restaurant enthusiast, Kent Frasure, has been in quarantine for over 14 days but has tested negative for the virus twice. He expects to leave the ship Friday.

"It's a big concern," Frasure said. "Am I allowed to walk the streets of Tokyo? Can I walk into a Pizza Hut or something? Can I go into this sushi place or are we stuck again for 14 more days in some sort of housing?" 

This begs two questions both of which I will summarily answer: First, yes that is a real quote; and second, for any Americans who plan to travel to Tokyo, there are at least 20 different Pizza Hut locations in the Greater Tokyo Area, according to Google Maps. Bon appetit. 

Cruise Ship Stocks Continue to Sink 

The $45 billion cruise industry is facing a tidal-wave size loss in revenue due to the outbreak. Cancellations continue over virus fears and major cruise ship stocks are down up to 16%. 

CCL is trading at $42 per share as of early morning Friday, back around its six-month low in October of $40.13 per share after a runup from $43.54 per share in early December to a six month high of $51.90 per share Jan. 17. The company's ships visit about 700 ports under the Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, P&O Cruises (Australia), Costa Cruises, AIDA Cruises, P&O Cruises (UK), and Cunard brand names. As of January 28, the company operated 105 ships. The company has warned shareholders that earnings per share could take as much as a 65 cent hit in 2020 if the company is forced to stop its Asia operations. 

Royal Caribbean Cruises Ltd. (NYSE: RCL) hasn't fared much better as it struggles to navigate the market. Shares in RCL were trading at $106.56 per share as of early Friday, down from a seasonal high which peaked at $135.05 per share on Jan.17.  Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH) has seen its stock tread water furiously, but has still slipped to $47.75 per share as of early Friday down from a high of $59.65 per share on, you guessed it, Jan.17. 

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Some Stock Market Captains See Smooth Sailing Ahead 

Not everyone is as down on cruise ships as I am, but rather see opportunity on the horizon. Mark Tepper, president and CEO of Strategic Wealth Partners, said this on CNBC's "Trading Nation":

"In my opinion, the coronavirus has really created a buyable pullback," Tepper said. "Of all these names, my favorite would be Norwegian." He then qualified his statement by saying that he wouldn't buy in just yet, preferring hotel plays like in the badly hurt hospitality sector such as Mariott International Inc. (Nasdaq: MAR), over cruise ship stocks. MAR traded at $143.04 per share as of early Friday.

But if not now for cruise stocks, then when? Perhaps we should wait for a return of the Black Death to Europe's ports before we get in on cruise ship stocks trading even further below sea level. 

And Then There's That Italian Guy...

The outbreak of the coronavirus wasn't the first event to sink cruise ship stocks. Mostly, they have periodically delved into the deep due to the ships themselves being unable to stay afloat. How it is that, in this sophisticated age, ships still manage to sink into the ocean (i.e. that we haven't totally figured out boat technology yet)--is as mind-boggling as it is frequent. To wit: from 1980 to 2012, about 16 cruise ships have sunk. While the numbers, though they vary depending on the source, suggest that cruise ships are nearly as safe as airline travel (known as the safest form of travel), if one were to compare the amount of criminality, violence, and malaise on a Cancun-bound cruise ship to a commercial airplane, they would be leagues apart.  Forget about catching the coronavirus or sinking, between Legionnaires' disease and date rape alone, there's quite a bit of sea-going suffering going on. Plus, even if an Italian airline pilot wanted to abandon his post and leave the passengers to fend for themselves, short of a parachute-in-cockpit situation, it is highly unlikely. (Francesco Schettino, the captain of the Costa Concordia, whose 2012 sinking caused 32 deaths, was later convicted of manslaughter for leaving the ship prematurely.). After the tragedy, stocks in cruise ships, once again, sank. 

So, when it comes to cruise ships--whether to chill on vacay or to invest--I'll politely say no grazie. Better to invest in Virgin CEO Richard Branson's rocketship; at least that travel stock might one day reach otherworldly heights. 

Virgin Galactic Holdings Inc (NYSE: SPCE) traded at $33.70 as of early Friday, up from $7.44 in early December. 

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