Recognizing A Bad Stock Before It Burns You

With the price of oil coming down to the $40 to $50 range, some companies that have fuel charges as a major expense are reporting profits that are higher than usual. You are seeing that with Carnival Cruise Lines which are seeing profits grow from $1.39 in 2013 to an expected $2.40 in 2015. The price of the stock has increased from $31 in 2013 to $47 at the end of today’s close. You do not want to hitch your family’s fortune onto the back of companies like this.

The reason why I say that is because Carnival carries high debt, has an indistinguishable moat, normally operates with high fixed operating costs, and is highly susceptible to high oil and gas prices. There is no need to ever buy a company that lives and dies according to a reverse cyclical relationship with the energy sector (i.e. when the cost … Read the rest of this article!