countercyclical stock

Contramarket Stock

Stocks that tend to do well when most of the market is performing poorly and that do poorly when the market is performing well. A key to finding contramarket stocks, in addition to regular due diligence like surveying past performance, is finding companies that might profit when people either do not have money or think that they do not. For example, budget retailers and fast food restaurants tend to be stable and even experience some earnings growth. Likewise they may not do as well during economic expansion because more consumers seek luxury products.

countercyclical stock

A stock that tends to increase in price during recessions and decrease in price during economic expansions. The stocks of companies with relatively stable sales and profits are generally considered countercyclical. Likewise, utility stocks, which generally have stable earnings and dividends, tend to be countercyclical. Compare cyclical stock.

Countercyclical stock.

Stocks described as countercyclical tend to continue to maintain their value and provide regular income when the economy is slowing down or staying flat.

Companies whose stocks fit into this category are those whose products are always in demand, such as food or utilities. They may also be companies whose services reduce the expenses of other companies, such as providers of temporary office help.

Or they could be financial services companies that specialize in cash equivalent or other stable value investments. By including some countercyclical stocks in your equity portfolio, you can balance the potential volatility of cyclical investments.

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