Norwegian Cruise Line Holdings Ltd

Notably, membership rolls continue to grow. New to the sector this quarter was Norwegian Cruise Line Holdings Ltd., an operator of thirty-four cruise ships across Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises. The company is focused on enhancing its core offering by adding shorter, 'fun and sun' itineraries and by adding amenities for families, investing in technology such as the AI-powered 'Nora' agent to streamline booking, and planning a major overhaul of their loyalty program.

We believe NCLH can grow earnings power double digits for the next decade or more. The other large cruise lines have already made it back to post-pandemic record prices, we believe NCLH will too. NCLH got hit hard during the selloff this year due to concerns about cyclicality and debt, but we see significant upside as the market has undervalued its potential recovery and growth.

Norwegian Cruise Line (NCLH $15.50) is another example of a company we think is very attractive at current levels. It's more than 50% off the highs. This year, it guided $2.45 in earnings power. We estimate recessionary earnings of $1.25-1.40. It's historically traded at 12-14x so it's fully pricing in a recession. If NCLH just makes it back to $2.45 in 5 years and 12x, you make 13% a year. We think that’s likely too conservative. During the financial crisis, the most severe recession since the Great Depression, Norwegian made it back to peak earnings in 3 years. We think NCLH should be able to grow earnings per share low double digit for more than a decade. If we’re right, it should compound at close to 20%.

In the quarter, we initiated a position in cruise ship operator, Norwegian Cruise Line Holdings Ltd. (NCLH). Despite shares trading lower due to investor concerns about consumer sentiment and a potential new tax on cruise lines, we believe these risks are currently priced in and present an attractive entry point. Consumer demand and booking trends remain strong, and NCLH is focused on right-sizing its cost base and improving margins for sustainable growth. We are optimistic that these efforts will positively impact the business and position the company for long-term success.