Carnival

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Cruise line operator Carnival ( CCL) has seen some rough seas in recent years. Costa Concordia, the ocean liner that ran aground off the coast of Italy last January, was one of Carnival's ships. So was the Carnival Triumph, which suffered an engine fire earlier this year, leaving passengers adrift for four days. But despite PR nightmares and freak accidents, the world's largest cruise operator has some attractive tailwinds pushing at its back this summer.

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Carnival owns more than 100 ships that fly the flags of its wide spectrum of brands. In addition to Carnival's namesake line, the firm's portfolio includes names like Holland America, Cunard, Princess, and more than a half-dozen other lines. That diversification gives Carnival exposure to vacationers in all income brackets and on three continents. As the cruise industry continues to grow in popularity, especially as cruise-hungry baby boomers reach their retirement years at record rates, Carnival's upside potential is continuing to increase. And the conspicuous mess-ups of the last couple of years are helping investors grab a bargain price tag right now.

There's no question that the cruise industry is capital-intense: new ships can ring up at a price tag of around $1 billion. But Carnival is entering the tail end of its buying cycle, and limited deliveries should help boost profits in the next couple of years. From a financial standpoint, Carnival's best-in-breed balance sheet gives it the wherewithal to handle unexpected rough seas. And while fuel costs have been rising materially over the years, CCL indexes its prices to the cost of oil, reducing risk and taking the need for commodity hedging off the table. Expect CCL's fortunes to turn with the tide.

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