Cruise stocks are making a comeback.
The group has been struggling amid growing fears around the spread of the coronavirus — with Carnival Corp., Royal Caribbean and Norwegian Cruise Line Holdings down more than 13%, 12% and 7% respectively year to date. But cruise ship stocks caught a bid Wednesday as the broader market continued its seemingly unshakable trek to new highs.
At Wednesday's close, Carnival was up over 2.5%, Royal Caribbean was up nearly 4% and Norwegian Cruise Line was up 3%. Earlier in the day, Carnival warned shareholders its earnings per share could take as much as a 65 cent hit in 2020 if the company is forced to halt its operations in Asia.
The stock of one of those major cruise liners that looked particularly good to JC O'Hara, chief market technician at MKM Partners, and Mark Tepper, president and CEO of Strategic Wealth Partners, who appeared Wednesday on CNBC's "Trading Nation."
"In my opinion, the coronavirus has really created a buyable pullback," Tepper said. "Of all these names, my favorite would be Norwegian."
While Tepper said he wouldn't be a buyer of the cruise stocks just yet — he preferred hotel plays like Marriott for their "strong brand loyalty" and affordability relative to the cruise lines — Norwegian stood out to him as the best bet in its group.
"Booking windows and volumes are going up, discretionary on-board spending is strong, they've got a newer fleet, they've got the ability to enter new markets and, of the three, it's the only one that doesn't pay a dividend, so, if they did begin to pay one, that'd be a positive catalyst," the wealth manager said.
Norwegian's chart supported those fundamentals, O'Hara said. The technical analyst added that, historically, cruise stocks' performance in response to negative news like this tends to lead to "a buyable dip."
"I do agree with Mark. I think the way to play this is Norwegian," O'Hara said, referencing its chart.
"If you look at Norwegian versus its peers, it's in the best technical shape. Currently, it's only down 10% from its recent highs versus its peers, which are down closer to 15%," he said. "So, we've lost less and we're actually starting to climb back faster. So, I think if we are ready to dip our toe into the water, Norwegian is the cruise liner to buy here."
Still, both traders preached patience in their own way, Tepper with his preference for Marriott and O'Hara with some words of caution.
In past headline-driven downdrafts in the cruise line group, "it required patience for the stock[s] to slowly start climbing back," O'Hara said. "That makes sense, especially around the coronavirus. Who knows how long this is going to last? Who knows if we've seen the worst of it?"