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Even Now, Royal Caribbean Stock Remains a Covid-19 Gamble

For RCL stock, everything depends on the pandemic's trajectory

For those that want to gamble on cruise-operator Royal Caribbean (NYSE:RCL), I don’t share the same optimism. However, I can appreciate why you’re tempted to gamble. For one thing, we Americans are fortunate to live in the greatest nation on earth. Based on that context, you’d think that it will be utterly ridiculous for a virus to upend our society. Therefore, RCL stock seems like a reasonable contrarian bet.

Royal Caribbean (RCL) ship Allure of the Seas, docked.
Source: Laszlo Halasi / Shutterstock.com

Additionally, you have some supporting facts. Primarily, data from the Centers for Disease Control and Prevention indicates that daily novel coronavirus cases have declined sharply from their summer peak. Adding to that storyline, it’s fair to say that most Americans — except, of course, the occasional outbursts from one of the Karens — have adapted to the new normal.

As well, the economy, while fractured, is demonstrating signs of improvement. So long as we work together to flatten the curve for good, more segments of society can reopen. Ultimately, this is a significant positive for RCL stock.

And there are many other developments, such as the race for vaccines and treatments for Covid-19. At some point, one of these pharmaceutical and biotechnology firms should find the missing link. When that happens, the consumer will come roaring back and RCL stock will be off to the races.

However, when that will happen is the million-dollar question. While you’re trying to figure it out, it’s probably best to stay on the dock regarding RCL stock. Frankly, I don’t see any reason to hurry into cruise ship operators.

At the end of the day, these are vacation platforms, not for genuine transportation needs. Right now, frivolity is low on most people’s priority list.

RCL Stock Must Still Combat the Coronavirus

You know what’s also low on the list of desires in 2020? Getting sick and dying.

If you’ve read some of my recent work, you’ll know that I’ve been bashing Fox News. There’s a good reason for this. Consistently, the White House’s favorite channel disseminated out-of-context information to weave a narrative that millions of Americans want to hear. For instance, that the coronavirus isn’t as big of a deal as you think it is.

Well, it depends on the context. For example, if you compare the infection and death rates of U.S. Covid cases, they currently stand at 2.2% and 2.9%, respectively. That’s not great but those are reasonable metrics. And while New York’s death rate is a whopping 6.8%, according to a medical report published by the National Institutes of Health, over 86% of the Empire State’s pandemic deaths involved at least one comorbidity.

So yes, Fox News is correct in its assertions about keeping our coronavirus cases in perspective. However, this context does not help RCL stock in any way. But I’m worried that Fox viewers will misinterpret this information to mean that the coronavirus could be downplayed in all circumstances, such as political rallies or going on a cruise.

Because if the science has taught us anything, it’s that the coronavirus spreads very quickly in condensed spaces. For instance, when a Diamond Princess cruise ship was stricken with the virus, 712 people were infected, resulting in 13 deaths.

In this instance, the death rate is 1.8%, which is within the realm of “reasonability.” But the infection rate was a whopping 19.2%, considering that 3,711 people were onboard that ship.

Therefore, if another coronavirus outbreak occurs on a cruise liner, passengers are risking another calamity, one that RCL stock cannot afford.

Everything Depends on the Pandemic’s Trajectory

When it comes to going on that exotic vacation, people ought to follow the science and make the best decision in relation to their health profile. For investors, though, they should follow the math.

And the math shows that an inverse correlation exists between RCL stock and new daily coronavirus cases in the U.S. In other words, as cases rise, RCL has demonstrated consistently that its market value declines, and vice versa.

RCL stock vs. Covid-19 cases
Click to Enlarge
Source: Chart by Josh Enomoto

Interestingly, between Sept. 8 and Sept. 24, new U.S. Covid cases increased from 23,301 to 42,340, according to the CDC. During that time, RCL stock slipped from $71.51 to $59.97. Even to this day, investor sentiment toward cruise ship operators is almost the mirror opposite of Covid-19 cases.

So, if you want to speculate on Royal Caribbean or any of its competitors like Carnival (NYSE:CCL) or Norwegian Cruise Line (NYSE:NCLH), forget the fundamental or technical arguments. The biggest catalyst is still the coronavirus. Unless you genuinely believe the pandemic is about to fade away, I’d be very cautious about touching RCL stock.

As of the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


Article printed from InvestorPlace Media, https://investorplace.com/2020/09/rcl-stock-cannot-shake-coronavirus/.

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