Royal Caribbean Cruises Ltd. (NYSE:RCL)

Rough seas ahead for the short term as Royal Caribbean flounders in the wake of Carnival Corp.’s problems. Should be smooth sailing ahead, probably by next year.

First, the disaster in Italy involving a competitor's ship threw a pall over the entire industry, but on top of that this weekend there was an outbreak of norovirus on one of RCL's vessels, sickening 300 passengers.

How did this stock get so over-valued last year?

Sales have gone up consistently. Earnings have been mixed but I believe in the company's solid underlying business and core operations. Cruise vacations are on the rise. Just now there was a tragic disaster with a cruise ship in Europe and there might be a short-term market backlash for the industry, but RCL, who were not implicated in the disaster, may well benefit in the longer term.

Cons: Incompetent management team that nearly earned the bankruptcy charm in 2008 because of excessive leverage. The stated book value is a joke; most of the $17 Billion of stated assets has probably gone into rust. Another liquidity crunch should finish it off.
Pros: The immense enrichment of the top 1% in the nearest few years should double the demand for cruise vacations and triple the bottom line. The coming hyperinflation will turn the debt-laden balance sheet into an advantage. When the price of tours goes up, the rusty ships and drunken captains will be worth much more. That the stock should fall 6% because of some very trivial nonevent in Italy is unreasonable.

Market over-reacts to sinking ship news

FinViz - Below book value with good earnings. Book value ratio at 0.67

"When trade times are measured in microseconds, but business value is generated over years, there's a very real potential for a huge gap to open between a stock's price and a company's value. It's by looking for and exploiting those gaps -- and then waiting for the short-sighted computers to catch up with the long term reality -- that you have an edge over today's high tech traders.

One straightforward way to find such opportunities is to look for profitable companies that the market has discarded as being worth more dead than alive..."

(Excerpt from a draft CAPScall article with estimated publication date of 29-DEC-2011)

Expanding business to China, will benefit during improvement in economy.

seems like a value trap

piotroski screen

This stock has taken a HUGE beating over the past couple of months. Largely in part due to an accounting error which effects prior year figures slightly. As a consumer who has been on multiple cruises, I believe RCL to be the best quality among them and their new ships seem to be a hit with the crowd. In addition, the insider trading is pretty encouraging. I think this company is undervalued at the moment.

value

Intrinsic:0

Travel will pick up now that more people are working, plus the "mega" cruise ships are very popular and making lots of money for RCL. like "Oasis" and "Allure".

low PEG, strong price uptrend

Improving economy means more business for cruise lines.

Reviewed this after giving it a thumb up.In fact it's a dump for me!

Not a good industry at this time. I will short or buy puts. Resistance is somewhere about $44.5. It it gets to this price on 3/11/2011, I will buy puts or shell the 4/2011 calls if reach my price!

Fortune 500 pick.