Cyclical stock

Cyclical stock

Stock that tends to rise quickly when the economy turns up and fall quickly when the economy turns down. Examples are housing, automobiles, and paper.

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cyclical stock

Common stock of a firm whose profits are heavily influenced by cyclic changes in general economic activity. As investors anticipate changes in profits, cyclical stocks often reach their high and low levels before the respective highs and lows in the economy. Compare countercyclical stock.

When should I invest in cyclical stocks?

With the proper crystal ball, you should buy cyclical stocks six months before the earnings in the target group begin to move up, and sell the group six months before the earnings turn down. Note: Most crystal balls are cloudy!

Steven Flagg, Senior Vice PresidentInvestments, UBS PaineWebber, Mount Kisco, NY

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Cyclical stock. Cyclical stocks tend to rise in value during an upturn in the economy and fall during a downturn. They usually include stock in industries that flourish in good times, including airlines, automobiles, and travel and leisure.

In contrast, stock in industries that provide necessities such as food, electricity, gas, and healthcare products tend to be more price-stable, as do companies that provide services that reduce the expenses of other companies. Those stocks are sometimes called countercyclicals.