In the stock market, everyone knows prices go up and down and when they go up people get excited and when they go down, you might bargain shop. The bargaining shop is the toughest aspect because the stocks went down for a reason and you have to ask yourself has the reason changed and more importantly do people know about it that they want to get back in the stock. The homework you do to analyze the company allows you to determine what the reasons for decline are and if a turnaround is possible. The other part of do investors want to get back in the stock is much harder because the industry is not likely on the front page of either the news section or the business section.

In an article by Jeff Sommer of the New York Times News Service, he notes 3 of the big cruise companies – Carnival Corp, Royal Caribbean Cruises Ltd, and Norwegian Cruise Line Holdings Ltd are among the top 10 stocks in the S&P 500 this year.

Each of the cruise lines had astonishing gains for the first 6 months according to FactSet:

Carnival up 134% in the first 6 months, but down 63% since the start of 2020.

Royal Caribbean up 110% in the first 6 months, but down 22 since the start of 2020.

Norwegian Cruise Lines up 78% in the first 6 months, but down 63% since the start of 2020.

If you owned stock in the cruise lines in 2020 you lost money because of the pandemic – the ships were not sailing. The companies survived by taking on enormous debt loads and paying sky high junk bond yields. In 2022, the finances stabilized and this year the stock is up because the companies can pay down debt and return to steady money-making operations.

Carnival CEO Josh Weinstein said the company’s business levels are approaching 2019 levels for the first time since the pandemic. Carnival expects to pay $8 billion in debt by 2026, down from a peak of $35 billion in 2023. If all goes well, the bonds will reach investment grade levels again.

Linking to dividend paying stocks, cruise lines show the classic signs of what happens when customers can not use the services, debt levels go up and when customers come back debt levels decrease. From a dividend paying investor it is too early to buy shares, but when debt levels become investment grade, there will be stability in the stock price or less risk.

There are more questions than answers, till the next time – to raising questions.