We recently published a list of 8 Stocks Under $20 To Invest In Now. In this article, we are going to take a look at where Carnival Corporation & plc (NYSE:CCL) stands against other under $20 stocks to invest in now.

Will We Have a Soft Landing?

There has been a lot of discussion happening lately regarding the economy and the markets. While the economy was doing great with the Federal Reserve cutting interest rates and analysts expecting the markets to continue the bullish outlook, the recent geopolitical circumstances have again created doubt among investors.

We recently covered an article about 10 Stocks Under $10 With High Potential, where we talked about how the market is expected to perform if the geopolitical situation escalates. Tom Lee, managing partner and head of research at Fundstrat Global Advisors, mentioned that he would be buying the dip if the market goes there and also presented his bullish thesis regarding how the market tends to perform well after such tensions. Here’s an excerpt from the article:

“Tom Lee, managing partner and head of research at Fundstrat Global Advisors, appeared on CNBC to discuss what the stock market looks like in the current geopolitically tense environment. Lee has been bullish on small caps for a long time however, he has also remained cautious regarding some bumps in the start before the market for small caps starts to rise. He maintained a bullish stance, projecting a year-end target of 6,000 for the S&P 500, despite acknowledging potential short-term volatility due to upcoming events like the election and geopolitical tensions in the Middle East.

He emphasized that current market conditions are tricky, with headline risks stemming from a potential port strike that could impact the economy. Lee suggested that if a significant dip occurs, it would be a good opportunity to buy, as he believes the long-term outlook remains positive despite temporary setbacks.

Talking about how the market has performed during wars in the past. Lee noted that historically, market reactions to geopolitical conflicts have often been more positive than anticipated. He cited past conflicts where buying during initial downturns proved beneficial, except for the recent Russia-Ukraine war which went otherwise due to concurrent Federal Reserve tightening.”

Building upon how the market is progressing, Larry Adam, chief investment officer at Raymond James, says that the current market is exactly what a soft landing looks like. Adam recently appeared in an interview on CNBC to talk about how the lower interest rates will benefit the small caps in particular the Russell 2000. He believes that the bull market will continue while the economy inches towards a soft landing.

When it comes to small-cap stocks they get around 56% of their financing from the short end of the curve. The short end of the curve refers to the short-term interest rate on the yield curve, which typically represents the yields on bonds with shorter maturities, such as 2-year or 5-year Treasury notes. Whereas the large-cap companies get only 26% financing from these short ends of the curve. Therefore, Adam believes that as the Fed continue to lower interest rates it will help small caps meet financing needs.

He further pointed out that it is expected that the Fed will cut twice this year and another four times the next year. Another reason why he likes small caps is because the economy going towards a soft landing. Adam emphasized that we have already seen that the rate cuts helped small caps outperform the large caps. Historically speaking whenever the economy has a soft landing it typically helps the small caps greater than the rest of the market.

Moreover, while mentioning his favorite sectors, Adam likes technology, healthcare, and industrials in both the small caps and large caps categories. While reasoning his interests in these sectors, he mentioned earnings in these sectors to be one of the prominent likable factors. Technology has been the only sector in the large caps category that has seen upward revisions. Moreover, the cash flow that these sectors are generating is being utilized in buybacks, paying dividends, and future growth expansions.

Our Methodology

To curate the list of 8 stocks under $20 to invest in now, we used the Finviz stock screener and Insider Monkey’s database for Institutional Investors. Using the screener we shortlisted stocks trading under the price tag of $20 (recorded on October 4th). Once we had the list of stocks under $20, we ranked them according to the number of hedge fund holders as of Q2 2024. The list is ranked in ascending order based on the number of hedge funds.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Carnival Corporation & plc (NYSE:CCL)

Share Price: $17.34

Number of Hedge Fund Holders: 53

Carnival Corporation & plc (NYSE:CCL) is the world’s largest leisure travel company, primarily focused on providing cruise vacations. It operates a diverse portfolio of cruise brands, including Carnival Cruise Line, Princess Cruises, Holland America Line, Seabourn, Costa Cruises, AIDA Cruises, and Cunard. The company serves major cruise destinations worldwide, with a fleet of 102 ships visiting over 700 ports. They cater to millions of guests annually, accounting for nearly half of the global cruise market.

The pandemic was tough waters for Carnival Corporation & plc (NYSE:CCL) as the company went from being a profit-making company to a loss-enduring operation. Challenges resulted in debt accumulation, however, management has been recovering well due to its cost-saving efforts, It has limited its new ship orders, and chosen fuel-saving routes for its cruise.

With the easing of the pandemic, the company is now back on track to generating record profits. The fiscal third quarter of 2024 was a depiction of its strong performance. The company generated a net income of $1.7 billion, which was up 60% year-over-year. The quarterly revenue was record high to $7.9 billion, up $1 billion from the previous year.

This is not it, Carnival Corporation & plc (NYSE:CCL) has already exceeded the current year with the cumulative advance booked positions for 2025, indicating that this record quarter was not an anomaly, but rather a pattern that we will see throughout the next year.

Aristotle Global Equity Strategy made the following comment about Carnival Corporation & plc (NYSE:CCL) in its Q4 2022 investor letter:

“We first purchased shares of Carnival Corporation & plc (NYSE:CCL), the world’s largest cruise line, during the second quarter of 2019. At the time, we believed the company was improving in quality, as the industry (and shipyards) had consolidated to a point where returns on capital could increase systematically over time. In addition, cruising is underpenetrated when compared to land-based alternatives. Despite the difficulties faced by the cruise industry during the pandemic, in our opinion, consumer appetite for cruising remains high, with cumulative advanced bookings at the upper end of historical ranges. As discussed below, we believe Carnival’s peer Norwegian Cruise Line is more optimally positioned for the coming years.”

Overall, CCL ranks 2nd on our list of 8 Stocks Under $20 To Invest In Now. While we acknowledge the potential of CCL to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.