Trader says don’t bet on long term surge

Investors get back on board Carnival.

The stock topped the S&P 500 on Friday after rising 11%. CEO Arnold Donald said on Friday that nearly 60% of 2021 bookings in the first three weeks of June were new bookings as opposed to reschedules of a canceled cruise.

After falling 70% from January’s highs, the skies are not all blue for Carnival, Newton Advisors founder Mark Newton said on CNBC’s “Trading Nation” on Friday.

“Carnival still looks a lot like a bet given the uncertainty over the vaccine,” he said.

Carnival has been hit hard by coronavirus closures, canceled cruises and fears of weak consumer demand. Newton noted that the stock has fallen more than 36% since June 8, a short-term high, while the RSP’s equally weighted S&P 500 ETF has fallen 10%.

Nonetheless, Newton said Carnival could continue to rise, if only for the short term.

“With the price of $ 16, you can make a good case for a good risk / reward ratio given that it’s a decent trendline and the worst may be behind us and the market is. looking to the future, so potentially a rebound in the next four to six weeks, “he said.

However, he could still struggle in the longer term, he warned.

“The stock has gone down over 75% in just 2.5 years – the monthly momentum is still very negative. Everyone I know says it’s going to be difficult to plan a cruise in the weeks and months to come. come up, so it’s just a lot of uncertainty to really want to own the stocks for the long haul until you get more answers, ”Newton said.

Chad Morganlander, portfolio manager at Washington Crossing Advisors, avoids cruise lines altogether.

“When it comes to these types of companies, they have huge debt on their balance sheets, so they’re substandard companies,” Morganlander said during the same “Trading Nation” segment.

Instead, it favors stocks that meet three criteria.

“At this point in the market cycle, you want to look at the three rules of engagement. We will choose consistently growing, consistently profitable, high quality companies that don’t have a lot of debt on their balance sheets, ”he said.

Cruise lines don’t do the trick, he said.


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