Norwegian Could

Diane is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

It was smooth sailing for Norwegian Cruise Line Holdings (NASDAQ: NCLH) when the company went public on Jan. 18 at $19 a share, above the expected range of $16-$18.

The first trade after the opening bell was at $25. Shares subsequently rose to $26 before cruising a bit and ending the day at a calming $24.89. That 31% spike on its first day of trading as a public company has left many buoyant about Norwegian’s future prospects.   

The Miami-based operator of cruise ships raised some $447 million in its initial public offering after selling 23.5 million shares.

That gave Norwegian a market value of $3.8 billion, leaving it dwarfed by industry leader Carnival Cruises(NYSE: CCL) value of $29.7 billion, and colleague Royal Caribbean Cruises(NYSE: RCL) value of $8.2 billion.  

But, it is robust and growing demand for cruises and performance from competitors that makes Norwegian attractive and has been fueling investors’ appetite for the newly public company.  Over the past year, Carnival shares have risen 11%, while Royal Caribbean shares have spiked 30%.

What makes Norwegian particularly attractive to investors is its size. Yes size matters, and bigger isn’t always better. The smaller sized carrier’s growth prospects could outshine those of its rivals, which would in return handsomely reward shareholders.

With just 11 cruise ships under its helm, Norwegian looks almost minute compared to the 99 ships manned under the Carnival umbrella, and the 39 ships navigated by Royal Caribbean.  But, Norwegian is set to launch more ships soon, which could propel growth and profits and really make some waves in the industry. Currently three ships are on order, and an option remains on the table for a fourth to come online within three years.  Set to be christened in New York in early May is the 4,000 passenger Norwegian Breakaway. That will be followed up in early 2014 by the Norwegian Getaway.

On a couple of recent personal getaways, I was lucky enough to experience both a Norwegian and Carnival cruise ship experience.  While I am not really a cruising kind of person, I must say I did enjoy both.  But what stood out in my sea travels was Norwegian’s strict attention to details, in spite of its no-frills attitude.  Everything was always kept spotless, the food was excellent, the service superb, the activities plentiful and despite the very full ship, it was a relaxing seven days. The company, best known for its Freestyle Cruising Concept, which means no set times or seating arrangement for meals and no formal attire-required mantra, meant no waiting, no fuss, and no stress.

On Carnival, the lines to get on and off the boat, as well as on the boat, were often quite long. While clean, I wouldn’t go as far to say spotless, and the food was just okay.

Okay, this isn’t a review. It’s about an investment opportunity.  A couple of heavyweight hedge firms have recently hopped onboard Norwegian. Following the IPO, Apollo Management LLC owns roughly 33% of the company, and TPG Capital owns about 11%.

With consumers opening their wallets a bit more and becoming willing to splurge on a much needed vacation, Norwegian is in a position to benefit. Its no deposit required policy, free balcony upgrade, all inclusive options, and last minute and early bird deals could make it one nice deal for investors.


DianeAlter has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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