In A shares, which industries are cyclical?

Fundamentally speaking, any industry is cyclical, but the interval is different. The cyclical industries discussed in this paper refer to those stocks that rise and fall with the economic cycle, and these industries usually vibrate with the investment cycle of fixed assets.

The typical cyclical industries we think in investment are heavy asset industries such as steel, nonferrous resources, coal, cement, chemical industry, construction machinery and oil and gas exploitation.

Characteristics of cyclical industries Most cyclical industries are heavy-asset enterprises, with low gross profit margin and net interest rate, and they mainly rely on scale to win. When the macro-economy is in a high boom cycle, some cyclical industries, such as oil and gas exploration, cement, chemical and other companies, will increase market demand and product prices, and the company's operating income will increase substantially, and the company's overall net profit will increase.

When the macroeconomic situation declines, industry demand is sluggish, product prices fall, and operating income drops sharply, losses will occur. It is not until the new round of macroeconomic recovery and the completion of the enterprise destocking process that the industry can usher in the next high growth period and the company can regain its vitality.

Weak cyclical industries and growth industries The above industries are traditional strong cyclical industries, in addition to weak cyclical industries and growth industries. The correlation between weak cyclical industries and macroeconomic fluctuations is lower than the former, and the common ones are consumer industries such as food and beverage and pharmaceutical companies. Because of the rigid demand of these industries, whether the economic development is good or bad, the daily consumption demand and medical treatment demand of residents are real, so they are less affected by macroeconomic fluctuations.

The growth industry is an enterprise in the stage of continuous growth. At present, it is mainly some science and technology industries and innovative industries. The rapid development makes the market unable to see the turning point of the industry. Alibaba, Tencent, Apple and other companies are all such enterprises. Although the growth rate sometimes slows down, they have maintained growth for many years, and will not make big profits and big losses for several years like strong cyclical industries such as steel and nonferrous metals.

The strategy of investing in cyclical industries For enterprises that invest in strong cyclical industries, investors need to spend more time studying the industries where cyclical stocks are located. Because the strong cyclical industry is greatly influenced by the macro-economy, judging whether the industry is at a trough or a peak at this stage is the basis for making correct investment decisions.

For enterprises in weak cycle industries and growth industries, both of them are less affected by macroeconomics. Investors should pay more attention to the risk of investment time, trade cautiously at the high point of stock price, and don't take risks in order to chase high.

To sum up, when investing in industry cyclical stocks, it is most important to study and judge whether the underlying industry is in an upward trend or a downward trend. However, it should be noted that historical data may be misleading when judging individual stocks, so it is very important to diversify investment and set up a risk warning line to prevent sudden market risks.