What are cyclical stocks

Discussion in 'Ask A Query About Your Stock Picks And Portfolio' started by New_Investor, Sep 5, 2015.

  1. New_Investor

    New_Investor Active Member

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    What are cyclical stocks? Please name few good quality cyclical stocks?
     
  2. Meenakshi Razdan

    Meenakshi Razdan Administrator Staff Member Moderator

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    There is a good explanation of what are "cyclical stocks" in investopedia:

    DEFINITION of 'Cyclical Stock'

    An equity security whose price is affected by ups and downs in the overall economy.Cyclical stockstypically relate to companies that sell discretionary items that consumers can afford to buy more of in a booming economy and will cut back on during a recession.

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    Cyclical stocks rise and fall with the business cycle. This seeming predictability in the movement of these stock's prices leads some investors to try to time the market by buying these stocks at the low point in the business cycle and selling them at the high point. Examples of companies whose stocks are cyclical include car manufacturers, airlines, furniture retailers, clothing stores, hotels and restaurants. When the economy is doing well, people can afford to buy new cars,upgrade their home furnishings, go shopping and travel. When the economy is doing poorly, these discretionary expenses are some of the first things consumers will cut. If a recession is bad enough, cyclical stocks can become completely worthless as companies go out of business.

    Examples of cyclical stocks are commodity stocks (metals), textiles, autos. Examples of non-cyclical stocks would be Pharma, FMCG, Infotech etc.
     
  3. stockguru

    stockguru Active Member

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    Most of the commodity based stocks are cyclical in nature. But sometimes there are full industries that are cyclical in nature. For an example the reality industry is in downtrend at this moment.
     
  4. MoneyWorks4ME

    MoneyWorks4ME Active Member

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    You explain concepts very well Meenakshi
     
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