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Relative Value Securities - Essay Example

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Relative Value Securities

2. The persistent economic downturn may remain extended for next 3 quarters. Conclusion & Recommendations The available data and analysis suggests that CCL hold more promise to invest and hence it is recommended that 100% of the amount to be invested into CCL. These recommendations are based upon the assumptions and facts that CCL has been able to reinitiate its quarterly dividends. Since dividends serve as the best signal to the market therefore firm paying the dividend may be preferred over the firm not paying the dividends. Cash flows of CCL are healthy and its ROE is also better than RCL thus making it a more desirable option for investment as compared to RCL. Cruise Industry & Economy Global economy is passing through recession with high levels of unemployment as well as fluctuating oil prices. Though the traditional market for the cruise industry i.e. North America is making an economic recovery however, conditions in Europe are relatively discouraging due to sovereign debt issues as well as low economic growth. Thus the strategy of developing long term sustainability of the industry may face setbacks as it may fail to find lucrative and profitable alternative destinations. (Ebersold) Source: Overall international political environment is relatively volatile too with potential threats of terrorism as well as pirates. There has been an increasing activity of pirates especially in Somalia region with the possibility that such activities may be started in other areas too. Since both the cruise liners i.e. CCL and RCL also operate in non-US areas also therefore the fluctuations in the foreign currency values can also adversely affect the revenue of both the cruise liners. There have been concerns over the environment protection and the potential role of cruisers in disturbing the eco system of the sea. It is also because of this reason that the overall regulatory environment for cruise liners may become tough. It is also because of this link between environment and cruise industry that it has been attracting negative publicity. Various environmentalist groups are advocating against the industry due to potential damage that could be done to environment. Industry Review Cruise Industry is relatively young and faced consolidation as a result of its inherent business dynamics. Started in 1970s’, this industry started to become dominating industry in 1980s with higher consumer discretionary spending being done in this industry.1 The relative level of luxury involved in this industry therefore give consumers an added level of motivation to spend and consume on the luxury cruises. It is also important to note that this industry is typically divided into three important segments of luxury, premium and contemporary. The overall dynamics of each category however are relatively different and cater to the different needs and requirements of the customers according to their budget and financial preferences. These different segments of the business therefore are targeted at different segments of the market and are priced differently to suit the needs of the consumers pertaining to each category. Over the period of last 40 ...Show more


Introduction This paper will discuss about the potential investment prospect in Carnival Cruise Lines (CCL) and Royal Caribbean (RCL)- two of the major players in the Cruise Industry. Industry is growing and is considered as stable despite the recession. Both these companies are considered as the significant and important players in the industry and with the investment fund of $100 m to be invested, this report will actually provide an analysis of how this investment fund can be split and invested in any or both of these firms…
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Relative Value Securities essay example
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