Investing in cruise ship stocks

Prior to 2020, the tide was picking up for cruise ship stocks as the industry saw substantial gains. But no-sail mandates sparked by COVID-19 brought it down. Cruise ship stocks remain in turbulent waters as uncertainty over the coronavirus lingers. But the industry may make a comeback as healthcare experts work with it to lay a framework for a safe return to the sea.

What are cruise ship stocks?

Cruise ship stocks are stocks of companies that run cruise ships and transport passengers to their destinations while offering comfort and entertainment along the way.

Estimated to be valued at $US 23.8 billion in 2021, the global cruise ship industry includes more than 270 ships powered by more than 50 cruise lines.

But three companies own about 75% of the market share: Royal Caribbean, Carnival and Norwegian. The first two pay dividends to shareholders.

How to invest in the cruise ship sector

There are several ways you can get your feet wet with cruise line investing in Australia. You can buy shares of individual cruise stocks. Or you can purchase shares of an ETF that invests in multiple cruise ship stocks and possibly other stocks in the travel industry. Here’s how to start:

1. Choose a stock trading platform. You have plenty of brokers to choose from in Australia, so be sure to compare your options to find the one that works best for you.
2. Open your account. Be ready with your ID and bank account information.
3. Fund your account. You’ll need to transfer money to your brokerage account before you can start investing. Some platforms let you start with as little as $1.
4. Search for stocks. Look up stocks by ticker symbol or use a stock screener to filter the types you’re interested in.
5. Place an order. Once you’ve found an investment you want, specify how much of it you wish to purchase and submit your order.
6. Monitor your investments. Track the performance of your portfolio by logging on to your account.

Why invest in the cruise ship sector?

Cruise stocks can surge in strong economies when people have more disposable income to travel. In fact, the cruise ship business was becoming the fastest-growing sector in the travel industry a few years before 2020.

In 2018, the global cruise ship industry was valued at about $US 150 billion. In 2019, it generated $US 5.5 billion in economic activity in the US alone, marking a 5.3% increase from 2018, according to the Cruise Lines International Association (CLIA), which represents most of the globe's cruise ship companies.

This was fueled by a spike in people looking to take cruise vacations. In 2019, more than 1.37 million people boarded cruise ships that took off from US ports. That translated to an 8% increase from 2018 and a 26% increase from five years prior.

But downturns in the global economy and the wider travel industry can cause cruise stocks to take a major plunge.

What unique risks does the cruise ship sector face?

The cruise ship industry is interconnected with a wide variety of different industries and sectors that help keep it afloat. For instance, cruise ships need large amounts of fuel to operate. If volatility erupts in the energy sector and fuel prices rise, it may take a toll on the earnings of cruise line companies. Here are examples of other sectors that can affect cruise ship stocks.

And of course, travel restrictions can mean fewer people on cruise ships and less money in the pockets of the cruise companies. This is evident now in the midst of the COVID-19 fog.

COVID-19 has taken a toll on a broad range of businesses across the globe, one of the hardest-hit sectors has been the cruise line industry. Each of the three largest cruise ship operators saw sales sink by at least 65% for the first nine months of 2020.

Nonetheless, the cruise ship industry is slowly getting back on its feet. Cruise stocks may begin to recover their previous highs as safety measures are put into place and news surrounding a COVID vaccine develops, but it will have a long way to travel.

Compare trading platforms

To invest, you’ll need a brokerage account in Australia. Explore your options below.

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Name	Product AUFST	Price per trade	Inactivity fee	Asset class	International
eToro Exclusive		US$2	US$10 per month if there’s been no log-in for 12 months	ASX shares, Global shares, US shares, ETFs	Yes	Exclusive: Get 12 months of investment tracking app Delta PRO for free when you fund your eToro account. T&Cs apply. Trade stocks, commodities and currencies from the one account and get access to social trading.	Go to siteMore Info Compare	loading Fetching your data...
CMC Invest Finder AwardExclusive		$0	$0	ASX shares, Global shares, Options trading, US shares, ETFs	Yes	Finder exclusive: Get $100 trading credit when you transfer $10k+ of either Australian or international stocks to CMC Invest. Only available for the first 50 new clients to participate. Use promo code “100CMC”. T&Cs apply. Trade over 45,000 shares and ETFs from Australia and 15 major global markets. Plus, buy Aussie shares or ETFs for $0 brokerage up to $1,000 (First buy order of each security, each day - excludes margin loan settled trades).	Go to siteMore Info Compare	loading Fetching your data...
Tiger Brokers Finder AwardExclusive		US$1.99	$0	ASX shares, Global shares, Options trading, US shares, ETFs	Yes	Finder exclusive: Get 4 brokerage-free trades and pay no FX fees on the first $2,000 you exchange each month with first deposit of any amount + plus get an $80 cash voucher when you deposit up to $2000. T&Cs apply. Trade US, Asian and CHESS-sponsored ASX stocks and US options.	Go to siteMore Info Compare	loading Fetching your data...
Moomoo Share Trading Exclusive		US$0.99	$0	ASX shares, Global shares, Options trading, US shares, ETFs	Yes	Finder exclusive: Unlock up to AUD$4,000 AND US$4,000 in $0 brokerage over 60 days. T&Cs apply. Trade US, Asian and CHESS-sponsored ASX stocks and get access to social trading.	Go to siteMore Info Compare	loading Fetching your data...
Superhero share trading Exclusive		$2	$0	ASX shares, US shares, ETFs	Yes	Sign up with code ‘finder24’ and get US$10 of Nvidia stock when you fund your account with $100 or more within 30 days. T&Cs apply. Enjoy US$2 brokerage (other fees may apply) on US stocks and buying ETFs as well as $2 fee to trade Australian shares up to $20,000.	Go to siteMore Info Compare	loading Fetching your data...

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Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Bottom line

Cruise ship stocks are swimming through rough waters after enjoying the high seas. The sector took a major hit from COVID-19, but evidence suggests the industry is working diligently with healthcare professionals to recover. The extent to which it recovers, if at all, is uncertain.

Depending on the type of investor you are, this may look like an immense risk or an opportunity. It’s important to do your due diligence and carefully analyze cruise ship stocks and your own risk tolerance before investing.

Frequently asked questions

• Why does it seem there aren’t many cruise ship stocks?

  Only three companies own about 75% of the cruise ship market. While you may have heard of numerous cruise lines, there’s a good chance these are subsidiaries of Caribbean Cruise, Carnival or Norwegian.

• What cruise ship mutual funds can I invest in?

  You can invest in a number of mutual funds in Australia that have exposure to cruise ship stocks. But keep in mind that cruise ship stocks only make a small fraction of the holdings of most funds. Examples include the Vanguard 500 Index Fund (VFIAX) and the Fidelity 500 Index Fund (FXAIX).