The coronavirus outbreak has certainly taken a toll on travelers, especially when it comes to leisure purposes. However, as the virus begins to subside and less new cases are reported in the media, leisure travelling could pick up substantially.
Individual stocks like Carnival Corporation, Norwegian Cruise Line Holdings and Royal Caribbean have certainly felt the pangs of the volatility amid the coronavirus outbreak. However, the tide could be turning for these stocks.
Per a CNBC report, these stocks are “struggling amid growing fears around the spread of the coronavirus — with Carnival Corp., Royal Caribbean and Norwegian Cruise Line Holdings down more than 13%, 12% and 7% respectively year to date. But cruise ship stocks caught a bid Wednesday as the broader market continued its seemingly unshakable trek to new highs.”
As cruise line stocks navigate to new highs, analysts are salivating at the opportunities the group presents.
“In my opinion, the coronavirus has really created a buyable pullback,” said Mark Tepper, president and CEO of Strategic Wealth Partner. “Of all these names, my favorite would be Norwegian.”
“Booking windows and volumes are going up, discretionary on-board spending is strong, they’ve got a newer fleet, they’ve got the ability to enter new markets and, of the three, it’s the only one that doesn’t pay a dividend, so, if they did begin to pay one, that’d be a positive catalyst,” the wealth manager said.
“I do agree with Mark. I think the way to play this is Norwegian,” said JC O’Hara, chief market technician at MKM Partners. “If you look at Norwegian versus its peers, it’s in the best technical shape. Currently, it’s only down 10% from its recent highs versus its peers, which are down closer to 15%. “So, we’ve lost less and we’re actually starting to climb back faster. So, I think if we are ready to dip our toe into the water, Norwegian is the cruise liner to buy here.”
An ETF Play on Leisure, Entertainment
From an ETF standpoint, investors can take a look at funds that hold these particular stocks or they can take a broad-based route with the Invesco Dynamic Leisure and Entertainment ETF (NYSEArca: PEJ). PEJ seeks to track the investment of the Dynamic Leisure & Entertainment IntellidexSM Index.
PEJ’s index it tracks is composed of common stocks of U.S. leisure and entertainment companies. These companies are engaged principally in the design, production or distribution of goods or services in the leisure and entertainment industries.
For more market trends, visit ETF Trends.