cyclical stock

Cyclical Stock

A stock that rises quickly when economic growth is strong, and falls rapidly when growth is slowing down.

Notes:

An example is the automobile market, because as growth slows in the economy consumers have less money to spend on new cars. Non-cyclicals would be industries like health care where there is constant demand.

See also: Cyclical Industry, Stock

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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