Fire sale at sea

We love Carnival Cruise CCL at today’s closing price of $33.10.    CCL recently lowered guidance for the year due to a variety of reasons, but certainly one of the most significant was the disaster at sea in February.  It also earned itself multiple analyst downgrades when it lowered guidance.  I’ve learned the hard way that you make your money on stocks that analysts hate, not love.  After all does anyone know of an analyst that didn’t love Apple last year?

Carnival  had what we describe as a selling climax day on May 21st  when over six times average volume traded closing out the day higher than where it opened, another confirmation of a washout day.  It’s also showing bullish divergence on the RSI line which is my favorite technical short term trading indicator.

 

 

Carnival is now trading at a 52 week low going into a summer that is sure to see stepped up consumer confidence, which means more cruise vacation buying and lower commodity inputs like food and fuel.  Add to this mix favorable long term demographics. Baby boomers are aging and will cruise more. Asia is just opening up to cruising.

Finally there is a short term catalyst. Royal Caribbean, the industry #2 competitor,  recently had a fire at sea proving that mishaps are not just Carnival’s doing. It is estimated  to take six weeks to repair the vessel Grandeur of the Seas.  The biggest beneficiary of this is their competitor, industry leader Carnival Cruise.  It couldn’t have happened at a better time too for the beleaguered stock.   It just crossed the wire this afternoon that insider, director Randall Weisenburger double downed buying 40,000 shares on 5-24-13 at an average price of $32.95.  He’s got a good track record as his previous purchase at Carnival is up 45%.

Read more about Carnival at this recent Seeking Alpha article below.

Favorable Tailwinds For Carnival Cruises

May 24 2013, 08:00 | 31 commentsby: Jeffrey Dow Jones | about: CCL, includes: DIS, NCLH, RCL Editor’s notes: Headline headwinds cloud a secular growth story for this industry leader. Numerous catalysts and a solid dividend floor create good value. Jeffrey Dow Jones spent the last decade co-managing a group of hedge funds.Disclosure: I am long CCL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha#. I have no business relationship with any company whose stock is mentioned in this article. #More…)

Some investors hate idiosyncratic risk. Others embrace it.

Only a handful of industries suffer negative “surprise” events the way that the cruise industry seems too. The latest shock came earlier this week when Carnival slashed its 2013 guidance because of weak earnings margins. Apparently, customers need a little extra incentive to book a cruise after the February fiasco involving the Carnival Triumph.

via Favorable Tailwinds For Carnival Cruises – Seeking Alpha#comments_header.