Travel Stocks And Shares: Risk Vs Reward Analysis

Stock investors know that oil prices, terrorism, and corporate debt restructuring, things that really cannot be controlled, have a substantial influence on the stock market. Many investors steer clear of airline shares because of this. They cannot control one of their biggest expenses (fuel) and an act of terrorism can certainly harm the industry.

Why are luxury cruise stocks any better? Rising fuel expenses as well as Hurricane Katrina resulted in lower stock prices for companies like Carnival Corporation and Royal Caribbean Cruises Ltd. Those two cruise companies account for about 75 percent of the cruise industry, globally.

When George Allen Smith IV, out of Connecticut, disappeared while on a Royal Caribbean cruise, the industry received lots of bad press.

Certainly, you'll find many downsides for cruise stocks and shares, but some stock investors are bullish. First, there is no direct indication that the disappearing honeymooner out of Connecticut has hurt ticket prices. Values on these stocks and shares also look very good.

Carnival Corporation trades at 16 times estimated 2006 profits. Its historic range is ten to 30 times earnings. Royal Caribbean trades at 14 times projected '06 earnings. Its historic range is five to 24 times earnings. Growth potential is strong as only 4 percent of Americans have ever gone on a cruise.

When thinking about cruise stocks, remember the potential risks. A sharp surge in fuel rates or another terrorist attack would likely have an undesirable influence on cruise stocks.

If you're unclear about this investment, do you know how to short a stock? This might be an obviously better route for you, especially if you're suffering from corporate debt restructuring.

I believe the risk outweighs the achievable reward as I do not anticipate cruise lines to drastically outperform the broader market.

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