I don’t know about you but I’m sick and tired of the millennial generation whining about Baby Boomers. Yes, it is true that the baby boomers have 52% of all wealth in the U.S.A., and that as of June 2024, they had over $72 trillion dollars in net worth.
First of all, they earned it. Second of all, they saved it. That’s how compound interest works. At 10% annual gains you will double your money every seven years. When you’re 30 and your balance is $100k, you double it to $200k at 37. When you are 55 and have $1 million you double to $2 million by 62.
The longer you live the more your savings grow – exponentially. It’s not rocket science. The question is: how do you profit from this situation no matter what your age.
Mass Retirement
There are 73 million baby boomers, born between 1946 and 1964. Today, ten thousand of them are retiring each day and just six years from now the entire cohort will be at least 65 years old.
What you may not know is that most of the money a person spends in retirement comes in the first few years – that’s when you travel the world – and the last few years – when you pay for cancer treatment and nurses.
We can focus on the former today and leave the latter for later.
According to Kiplinger the number one new thing retirees spend money on is travel:
“1. You’ll spend more on travel in retirement
Most retirees put “travel” at the top of the list of things to do more of in their post-work years.
… compared with their working peers, retirees choose longer cruises and cruises that visit more destinations, according to travel experts.”
Profit from Carnival
This is part of the reason Carnival Cruise Lines (CCL) is up 96% over the last year and Royal Caribbean (RCL) is up 156% over the same time frame. I first recommended RCL in 2022, when it was priced in the $50s, meaning you could have made 250% gains off that one recommendation.
Back then I recommended RCL based on the tourism boom after the COVID restrictions lifted. Today I’m recommending it because these stocks broke out of their trading pattern.
They broke out because times are good and margins are increasing.
From CCL Earnings:
“Third quarter net income was $1.7 billion, an increase of over 60 percent compared to 2023 and adjusted net income1 outperformed June guidance by $170 million.
- Third-quarter revenues hit an all-time high of $7.9 billion, up $1.0 billion compared to the prior year.
- Record operating income of $2.2 billion exceeded 2023 levels by $554 million.
“We delivered a phenomenal third quarter, breaking operational records and outperforming across the board. Our strong improvements were led by high-margin, same-ship yield growth, driving a 26 percent improvement in unit operating income, the highest level we have reached in fifteen years,” commented Carnival Corporation & plc’s Chief Executive Officer Josh Weinstein.
“We are poised to deliver record operating performance for full year 2024, with adjusted EBITDA now expected to cross $6 billion and adjusted return on invested capital1 to be approximately 10.5 percent. Strong demand enabled us to increase our full-year yield guidance for the third time this year and we improved our cost guidance driving more revenue to the bottom line,” Weinstein added.”
In other words, the company is hitting on all cylinders, just crushing it.
But it gets better.
Yesterday the price of oil gapped down on news that the Israelis bombed military targets in Iran.
The oil market was speculating that the Israelis would hit vital oil bottlenecks, which would cause Iran to hit Saudi oil production in return or otherwise close the straights of Hormuz – thus spiking oil prices to $250 per barrel and unleashing a global war.
That didn’t happen.
Two months ago West Texas Intermediary was trading at $80, now it is trading at $67 and falling on Chinese economic softness.
Who benefits from lower oil prices? Airlines, cruise ships, trucking companies… In fact, the larger cruise ships burn as much as $200,000 of fuel a day.
Which is why CCL just gapped up on a breakout:
Fuel price savings will go directly to the bottom line.
Currently, CCL has a trailing P/E of 17 and a 61.50% quarterly earnings growth (yoy). This gives it a price-to-earnings growth (PEG) ratio of 0.29 which is absurdly undervalued.
Margins will increase with lower fuel costs and lower interest rates. Furthermore, cruise lines carry tremendous debt due to the high upfront cost of ships. If the rate cuts continue this will also increase their margins.
It’s time to sell your oil plays and buy the cruise lines. Full disclosure, I put my money where my mouth is and own both Carnival (CCL) and Royal Caribbean (RCL).
All the best,
Christian DeHaemer
Outsider Club.com
Carnival Earnings: https://www.carnivalplc.com/news-releases/news-release-details/carnival-corporation-plc-reports-record-setting-operating
Carnival Earnings:
What You’ll Buy When You Retire:
https://www.kiplinger.com/retirement/602262/things-youll-spend-more-on-in-retirement
Oil Prices:
