Carnival Corp.

CCL-N

Cruising is an underappreciated segment. It is attracting a lot of people, not just the older demographic. Fewer ships are being built and demand is increasing. Cash flow is improving and debt is decreasing. Asia, China, and Cuba are popular destinations. There is a 38% growth rate on the dividend. A lot of the cash flow is currently going to pay down debt.

Royal Caribbean Cruises (RCL-N) or Carnival Corp (CCL-N)? Royal Caribbean has outperformed Carnival in the last 12 months. It is up about 50%, where this one is up about 30%. On a valuation perspective, this trades at over 1.1 PEG ratio compared to Royal Caribbean at .85. It is also cheaper. Both should do well.

Has had a lot of problems. Theoretically the cruise ship business is a great way to take a fairly inexpensive holiday. There is probably some pretty good protection from an asset point of view. The trouble is, the brand has taken a huge, huge beating. This is a high risk trade. He looked at it and decided against it.

This is something that he is looking at. Because of high fixed costs, cruise ships are extremely cyclical and totally tied to the global economy. Economic bad news is horrible for these companies, but it is a stock that intrigues him.

Have had lots of difficulties with the cruise line that got in accidents but have recovered brilliantly from that. Revenues have recovered. Bottom line took a big hit but it is doing reasonably well now. Insiders have been selling quite a bit. Do about $15 billion of revenues but debt load is about $9 billion. That is a pretty heavy debt load and he doesn’t like that.