There are plenty of strategies for picking stock winners, from finding low price-to-earnings stocks to buying companies selling at a discount to their future cash flows. At Motley Fool CAPS, the wisdom of crowds is used to find winning investments.
Thousands of players make predictions about whether stocks will outperform or underperform the S&P 500 -- and over what time frame. Players receive CAPS ratings based on the percentage of people they're outperforming, and stocks receive them based on the number of players who've picked that stock to outperform.
Importantly, players with higher ratings have more influence on a stock's rating, so if you've proven your investor chops with a great stock-picking track record, CAPS gives your opinion more weight.
You can put the wisdom of crowds to your advantage for your own portfolio. That could be especially helpful when examining cruise lines, which are all facing similar, difficult circumstances, but CAPS ranks the major players very differently. Let's see what the top stock pickers are saying about Carnival (CCL 1.49%) (CUK 1.34%), Norwegian Cruise Line Holdings (NCLH -0.77%), and Royal Caribbean (RCL 0.04%).
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Carnival
CAPS Rating: 3 out of 5 stars
What investors might be noticing: Vaccinations for COVID-19 have consumers excited about the potential for taking cruises once more. Carnival has the largest fleet in the industry and used the opportunity of the pandemic to shed its most inefficient ships to save money and make itself into a leaner operation.
It's essentially looking to generate greater revenue from fewer bookings by becoming less reliant on new-to-cruise guests. Because it has a strong base of returning passengers, or some 8 million guests who will be spread across fewer ships, it can operate more efficiently and profitably.
Norwegian Cruise Line
CAPS Rating: 2 out of 5 stars
What investors might be noticing: Norwegian Cruise Line is the smallest of the three leading operators, which could give it less flexibility and room for error in any recovery. Where Carnival's broad base of national brands gives it much greater geographic maneuverability, Norwegian's smaller footprint narrows and limits its focus.
It also carries a very rich valuation, despite the pummeling its stock took. The market may have gotten ahead of itself even if, like the other cruise operators, Norwegian sees significant latent demand for voyages. Most observers say the industry has at least two more years of rough seas ahead of it, and Norwegian has taken on a substantial amount of debt for its size.
Royal Caribbean
CAPS Rating: 2 out of 5 stars
What investors might be noticing: Sandwiched in the middle of the major cruise lines, Royal Caribbean just joined its peers in canceling almost all voyages until June. Its stock, though, has performed better than its rivals and traveled the furthest from its low point a year ago, despite having fallen the least. It also noted that even with pricing above 2019 levels, bookings for the first half of next year are about what they've been historically.
At this point it could be a valuation call on the stock because even if sailing resumes, it will be at a dramatically reduced scale. Cruise fleets won't be put back into service all at once, meaning Royal Caribbean's revenue potential will be similarly scaled down.
