Betting against cruise ship and hotel stocks backfired and cost hedge funds more than $6 billion, report says
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- AI hype has engulfed markets this year, but two of the S&P 500's top performers may surprise you.
- Cruise ship stocks have been riding high, defying pessimistic market consensus on the industry.
- Three of the biggest cruise companies cost hedge funds almost $3 billion in bad bets, per a report.
Hedge funds have lost more than $6 billion on bad bets against cruise ship and hotel operators this year, the Financial Times reported. Of this, the three cruise ship companies account for almost $3 billion of the total mark-to-market losses, according to figures from S3 Partners seen by the outlet.
The cruise industry has surged this year, releasing a wave of pent-up demand from the coronavirus pandemic. Year-to-date, Carnival is up 119%, Royal Caribbean is 112% higher, and smaller rival Norwegian is up 53%.
Other large short positions in Airbnb and Booking.com have also backfired after those stocks jumped 70% and 44% year-to-date respectively.
The stunning performance of the cruise industry can be attributed to making up for lost time after a dreadful pandemic for the sector, where leisure travel was heavily curtailed.
While cruise stocks still remain below their pre-pandemic valuations, the release of pent-up demand has been a boon to the sector.
Fears of recession persist, however, and a falloff in consumer spending could potentially spell bad news for cruise operators.
The stock market's remarkable 2023 rally has been carried by investor excitement surrounding artificial intelligence.
Tech stocks like Nvidia, Tesla, and Microsoft have all grabbed the headlines thanks to their stellar performance – but some of the best-performing stocks come from a more unlikely source: cruise operators.
Such a resilient recovery has confounded the expectations of short-sellers – many of whom were predicting a rout for the industry.
Carnival and Royal Caribbean are not so popular in the S&P 500 and are two of the ten most-shorted stocks in the index.