When predictions are written about the stock market in 2020, most of the coverage will inevitably be made in relation to the coronavirus epidemic. Despite years characterized by incredible volatility and record uncertainty, this S&P 500 As of December 31, the index had risen about 15.5%.
SPX data via y vicharts
The technology sector played the biggest role in the gains of the index, with virus-related conditions accelerating the transition to digital commerce and encouraging investors to adopt growth-based valuations for companies growing in fast-changing economies. Of course, the coronavirus epidemic also shaped the performance of the S & P500’s biggest losers: Carnival Cruise Lines (NYSE: CCL), Occasional Petroleum (NYSE: OXY), And Norwegian Cruise Lines (NYSE: NCLH).
Is it time to buy peat down stocks? Let’s take a look.
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Carnival and Norwegian troubles faced water
The cruise line industry was hit hard by the epidemic, and companies that did not have other business units to reduce their business suffered a sharp drop in valuations. Carnival and Norwegian crushed this year, with the S&P 500 stocks coming in as the 2020 worst performing and third worst performing respectively. The chart below tracks the performance of each company in a year.
CCL data by vicharts
It’s easy to put this mess in context: both companies have been temporarily suspended due to coronavirus-related concerns and the Carnival and Norwegian markets have been sitting on most of the recovery recoveries since the record-breaking breakdown. In the march.
Carnival and Norwegians will now resume the journey in early March 2021, however, the recent discovery of the mutating strain of coronavirus in Europe and other regions and new travel restrictions suggest that additional delays may be on the table.
At some point, the world will move much closer to normal, which should lead to better operating conditions for the cruise line industry. It could pave the way for a big boom for Carnival, Norwegian, and other companies operating in the space. Investors cannot be sure of the timeline and limits of a possible recovery.
Both cruise stocks have a potential offer, but the risk of getting a position in any situation is that the coronavirus could turn into an epidemic and a change in customer behavior could easily derail the bull thesis. It is well within the realm of probability that both or both companies will choose to delay their resume by surpassing the current March target, and it is possible that every business will see a decline in consumer interest for a long time after the horrific fear of the virus.
Contingency petroleum experienced a shortage of energy industry
Like the travel industry, the on-sector sector was hit hard by the coronavirus epidemic. The main means for reduced travel, manufacturing shutdowns and domestic employment is a significant reduction in energy demand. Contingency Petroleum saw its share price fall by about 56.5% in 2020 trading and was the second worst performing stock in the S&P 500 index.
OXY data by vicharts
Weak demand and a weak balance sheet forced the company to reduce its dividends earlier this year. Some investors have also expressed concern that the business could face bankruptcy. However, there are avenues for significant recovery of contingent petroleum stocks, and it seems that the cash flow for businesses should improve significantly in the near term.
It is likely that business will resume when the global economy recovers from the epidemic. It is also possible that another major energy company may decide to acquire Occidental and its assets at the company’s current valuation premium. On the other hand, operations for the business have been put in trouble and the latest refinancing measures highlight the fact that the company is dealing with a troubled balance sheet.
If you think that the price of oil is rising as the global economy improves, then by chance it is a stock that could have a big side. This thesis has a fair shot to pay, but it shouldn’t be considered convincing. The holiday industry has become very complex this year, and it will be harder and harder to predict in the near future.
There’s a big side effect, but know what you’re buying
There are clear reasons why Carnival, Norwegian and Id Cadental struggled so hard in 2020, and explain why each business is largely sitting in a high level of uncertainty about how it will operate next year and the broad market recovery of their shares. These are not value stocks in the traditional sense, but that does not mean that they will not provide tangible returns for investors.
Beat down stocks sometimes offer lucrative investment opportunities for those willing to take risks and run rough patches, and each of the three biggest 2020 losers of the S&P 500 could see a big jump if the virus-related pressure eases in 2021. People with high risk tolerance can detect. There’s a lot to like about Carnival, Norwegian and Casual as bets running from recovery, but the level of speculation included in the chart for individual risk factors and future effects of the epidemic for each company means that these stocks may not be the right fit. For many investors.
