Think buying stock in a cruise operator is just plain nuts? Apparently, you're not alone.

After the terrorist attacks earlier this month, major cruise lines like

Carnival

(CCL) - Get Report

,

P&O Princess

(POC)

and

Royal Caribbean

(RCL) - Get Report

saw their stock prices drop by more than 50% on average. Based on the decline in recent bookings, the worst might not be over.

Yet according to Deutsche Banc Alex. Brown analyst Michelle Russo, we may actually be on the verge of a terrific buying opportunity.

Best Time to Buy

It sounds odd to think about buying shares of a cruise line amid such uncertainty and the worst economic downturn in the past decade, doesn't it? But according to Russo's latest research report on the cruise industry, the best time to buy into the group "is in the heart of recession, when pessimism is near its maximum."

As evidence, Russo points out that between Aug. 2 and Oct. 11, 1990 -- the height of Gulf War tensions -- Carnival, the only public cruise line at the time, saw its stock fall 43.6%. But when the outcome of the conflict appeared a little more certain and consumer sentiment turned, Carnival's share price rose sharply. In fact, between Oct. 11, 1990, and April 30, 1991, Carnival's share price rebounded 120% from its lows.

To be fair, Russo doesn't believe the industry will recover quite as quickly this time because of overcapacity issues. But given favorable demographics and the average American's penchant for adventure, she's still bullish on the long-term outlook for the industry. And her top pick, not surprisingly, is Miami-based Carnival. After closing as high as $33.25 Aug. 27, shares have traded at about $20 since the Sept. 11 tragedy.

Focus on Carnival

She posits that Carnival is the industry player best positioned to weather a recession because of two reasons:

    It boasts a strong balance sheet. At 1.9 times book value and with manageable debt loads, the company has financial flexibility that most other operators don't. The company operates out of numerous ports and depends less on air travel than its competitors.

But before you ring your broker, Russo thinks we should wait for one of two things to happen:

    A U.S. response to the recent terrorist attacks. Military response might put Americans at ease -- and make us feel that the issue is being dealt with. Restored confidence in airline travel -- at least to some degree.

In short, the cruise industry is indeed a sketchy bet. But over the long run, Russo thinks that a rebound is inevitable. With that in mind, I plan to speak with her again in a few weeks to see if the fundamental picture has improved and whether it makes sense to bottom-fish any of these stocks, particularly Carnival. Stay tuned.

In keeping with TSC's editorial policy, Glenn Curtis doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Curtis welcomes your feedback and invites you to send it to

Glenn Curtis.