Carnival Corp. (CCL)

Cruise lines are leveraged to fuel, and oil prices are rising. True, cruises appeal to certain demographics, so there's demand, but this is not a sector she invests in.

They’re in the middle of a transition, trying to improve their use of capital and the utilization of their ships. The stock has had a great run for the past several years. He likes the metrics they are focusing on but he is not following it closely today because of its high valuation.

He generally likes this and likes consumer discretionary stocks at these levels as US consumers are in really good shape. Experience purchases are more important than material purchases to consumers. Talk at cocktail parties is favorable for cruises.

This has some good numbers. The free cash flow yield is high. Pays a nice dividend. However, it is cyclical. You are going to lose a lot of money in the stock if there is a recession, so be careful. In the long run, if you can withstand the deep troughs and the recessions, then you are going to be okay.

A great company. It does have its moments. Has been on a pretty strong run since mid-2016. It might be considered a parabolic move, so it needs to take a pause. It wouldn’t surprise him for this to consolidate and then break out. You might see it go up and down for a little bit before breaks out again.

With hurricane Irma bearing down, he would be careful about getting in this. As a general proposition, he likes this for the long haul. The cruise/leisure industry makes a whole lot of sense going forward. You can never go wrong generally, by going with the largest player in the group. However, you do want to pick your spots.

It was a bargain for a while because a number of the companies in the sector had struggled and had accidents. This is viewed as the leader in the industry. Fuel costs being low are an added benefit. You could have bought it cheaper a year ago, but there is plenty of upside going forward.

Carnival Cruise (CCL-N) or Royal Caribbean Cruise (RCL-N)? As a thematic investor, one of the key themes he is interested in is travel and leisure. Both these companies play into that theme, as does Disney (DIS-N). Both are well run companies and global. He would buy either one. Both should grow earnings in the mid-teens, and you could do well in either one.

Cruise ships have a tendency to do very well in the latter part of the year and into the spring. Chart shows a long-term upward trend from 2014 and it just recently broke to new highs. This is outperforming the market, and we are still in a period of seasonal strength. When owning a stock, you want technicals showing an upward trend and positive strength relative to the S&P 500, with positive seasonality as the extra positive. If you own, continue holding until April.

(Top Pick Jul 7/16, Up 8.05%) Cruise companies have a big expense in oil. She thought it was a great buying opportunity with there being fewer travelers across Europe. You can still buy in at this level. She likes the outlook. China is important to this company. There is a huge consumption base that has not been tapped.

Cruise line operators benefitted from the fall in energy and then along comes the Zika virus, but he thinks that will be solved in some way. Cruise operators have been confronted with things like this before.

(Market Call Minute.) Valuations are high. There has recently been a little slowdown in the industry because of some of the International issues on travel. This would be a Hold at best.

Has had quite a lot of volatility. Als,o has a lot of exposure every time there is a sense of a terrorist attack, particularly in Europe or the Mediterranean. That can really push the stock down. Right now she is not a fan of this. Although they have been having very good growth, there are a lot of headline risks. There has been a big drop in some of the travel industry, particularly in Europe where a lot of their revenues come from.

Clearly benefiting from weaker oil prices. A global company, so would have exposure to consumer demand on a global basis. The strong US consumer helps them. Feels the outlook is relatively strong for the whole industry.

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.