When U.S. investors think about cruise stocks to buy on the dip, they usually think of the three main companies: Carnival (NYSE:CCL), Royal Caribbean Cruises (NYSE:RCL), and Norwegian Cruise Line (NYSE:NCLH).
However, there are several cruise-related businesses that also make potentially attractive stock picks at this point in the market. It’s not just as simple as picking one of the three biggest players.
Furthermore, it makes far more sense to spread your bets amongst several companies that earn some of their revenue from the cruise industry — an industry that generated $55.5 billion in economic activity in 2019 before the pandemic took hold — and will benefit again once sailings get back to normal.
Of the three, I’ve always been partial to RCL because of former CEO Richard Fain’s excellent leadership. However, Fain stepped down as CEO in early January after 33 years in the job.
While Royal Caribbean is still my go-to pick — I got married on one of its ships — I’ll be sure to take the other two into consideration.
Here are my three cruise stocks to buy on the dip.
| LVMUY | LVMH | $142.30 |
| EXPE | Expedia | $109.23 |
| CRUZ | Defiance Hotel, Airline and Cruise ETF | $17.03 |
Cruise Stocks to Buy on the Dip: LVMH (LVMUY)
You’re probably thinking: “Isn’t LVMH (OTCMKTS:LVMUY) the owner of luxury brands such as Louis Vuitton, Christian Dior, Tiffany & Co, TAG Heuer, and many others?”
You’d be right.
However, amongst its many brands is Starboard Cruise Services, a business that operates retail malls and shopping zones onboard cruise ships. Based in Doral, Florida, Starboard is part of LVMH’s Selective Retailing segment, which includes Sephora and DFS, the duty-free giant.
As Starboard’s website states, the company operates on more than 90 cruise ships worldwide, providing retail services for 10 cruise lines, including the big three, while employing more than 1,500 people on those cruise ships.
In the first half of 2022, LVMH’s Selective Retailing business had revenues of 6.63 billion euros ($6.83 billion), up from 5.09 billion euros ($5.25 billion). However, that’s just 18% of LVMH’s overall revenue.
Why take a chance on one stock when you can own shares in a luxury conglomerate controlled by Bernard Arnault, the world’s third wealthiest person?
Down 14% year-to-date (YTD), it has an earnings yield of 3.86%, higher than it’s been since 2018. Long-term, it’s a home run.
Expedia (EXPE)
Expedia (NASDAQ:EXPE) is an online travel shopping company. If you want to go or stay somewhere, Expedia will help you get all of your travel details organized and booked.
When it comes to cruises, the company’s got Expedia Cruises to get you onboard and cruising to destinations worldwide. While Expedia doesn’t break out the revenues for its cruise business, ZoomInfo estimates its annual revenue is $515 million. That would make some sense as it generated $8.6 billion in overall revenue in 2021.
In 2020, Expedia Group launched an omnichannel strategy for Expedia Cruises that puts all of its cruise content on one site so travelers can either research and book their cruise independently online or through one of its franchised agents.
“We’re focusing on cruise in a big way, and it’s a long-term focus for us. We want to be the leader in digital experience and content, the leader in supply and transparent pricing, the leader in service and trip management…” PhocusWire reported Greg Schulze, senior vice president of transport and cruise at Expedia Group, saying in June 2021.
On Aug. 5, EXPE stock jumped on Expedia’s top and bottom-line beat in its latest earnings report. Overall revenues were up 51% to $3.2 billion, compared to Q2 2022, and 1% compared to Q2 2019. Business is back to pre-pandemic levels or close enough.
Down 40% YTD, it’s a buy.
Cruise Stocks to Buy on the Dip: Defiance Hotel, Airline and Cruise ETF (CRUZ)
In a bit of a nod to the name of the only U.S.-listed exchange-traded fund (ETF) that invests in cruise stocks as part of its theme. I’ve selected the Defiance Hotel, Airline and Cruise ETF (NYSEARCA:CRUZ).
CRUZ makes sense for investors who don’t want to risk their hard-earned capital on a single stock, reducing the company risk in their investment.
As you may have heard, on July 13, Tidal ETF Services LLC, the founders of the SonicShares Airlines, Hotels, Cruise Lines ETF announced that it was shutting down the travel-focused ETF. Launched in June 2021, it lasted a little more than a year.
CRUZ got its start around the same time. It accumulated almost $40 million in total net assets over the past year. Considering what the pandemic did to all three of these industries, it’s actually a decent haul. Investors should expect all three to thrive in the years ahead.
As for the big three, they’re weighted at 5.67% (CCL), 4.06% (RCL), and 3.19% (NCLH). All three are in the top 10 holdings, giving you significant exposure to the cruise lines while also gaining diversification, which is also important.
Down almost 21% in 2022, it’s not doing nearly as bad as Carnival and its peers.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.