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Relative Value Securities - Essay Example

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Finance & Accounting
Pages 8 (2008 words)


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

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. ...
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