A couple years ago, shares of Carnival Cruise Lines were pounded after the deadly sinking of the Costa Concordia and a major fire on the Carnival Triumph. While other investors sold their shares and ran in the other direction, I sniffed opportunity.
We are always looking at ways to save money on vacations and entertainment. Who pays full price, anyway? Recently I discovered a low-risk method to "pay" for two premium passes to all 10 Sea World/Busch Gardens parks - for two full years.
These premium passes weren't cheap: I paid $1,085 all-in for two passes valid for 24 months. As an investment in our entertainment, this has the potential to be a great value. If we visit once a month (we live near Busch Gardens Tampa Bay, so this is not unrealistic), admission will cost us about $23 per ticket. The premium passes also include parking, which saves us at least $15 each time we visit.
However, $23 per ticket to visit a premiere theme park isn't good enough for a Frugal Miser. Before pulling the trigger on this purchase, I found an attractive investment in Sea World (NYSE: SEAS). Truth be told, I was first attracted to the company's stock, which then lead me to investigate the most cost-effective way to get tickets for the parks. What made the stock appealing was the healthy dividend and the fact the company's shares have been negatively affected by what I think is a temporary problem (similar to Carnival two years ago). At today's price, each share of SEAS yields 4.8%. Compare that to a bank CD: a 24 month CD pays less than 1% interest. Assuming the dividend is safe, buying 645 shares of Sea World (an $11,000 investment) earns enough in cash dividends to pay for our passes. At the end of two years, I still own the 645 shares, which I could sell, likely at the same price or better than the stock trades today.
As a value investor, I never pay "full price" for stock in a company. Two years ago, Carnival stock fell following a series of misfortunes. Just as I suspected, that company has completely rebounded. I think Sea World is experiencing a similar situation. A documentary (Blackfish) hurt attendance, which is down by the low single digits. However, shares of the company have fallen 52% in the last two years. Risks are primarily that attendance figures continue to decline, either due to internal problems or another economic recession. The company has a lot of debt and the dividend is currently higher than earnings. Both of these issues need to be addressed. My thesis is that the debt is easily serviceable and the dividend can be covered by improved attendance at the parks. This Frugal Miser smells opportunity. On Monday I purchased 650 shares of SEAS at $17.67/share.