I think I would have bought CCL instead of RCL, if i decided to jump into the cruse ship sector at all. Sure RCL has a lower P/E ratio but also a much higher leverage. Debt to equity is 1.35 and it looks like this number will increase due to heavy investments. Interest payments are about 10% of revenues, compared to 2.5% of CCL.
I generally have put more emphasis on the "quality" of companies I invest in,than on valuation recently, after jumping into stocks like ELN, EP, MIR and the like. Measures of "quality" are market share, ROE, leverage, growth, management. What I found is that investing in "lower quality" and hence cheaper stocks does not work for me in a bear market. In my opinion, the strongest companies will recover first when the economy recovers and there will be a sweet spot when jumping into the 2nd tier companies will be more profitable as the bull market returns. |
