What is a cyclical industry? What are the typical cyclical industries?

Cyclical industries refer to industries with strong correlation with domestic or international economic fluctuations, among which typical cyclical industries include bulk raw materials (such as steel and coal). ), construction machinery, ships and so on. Characteristics: cyclical industries are characterized by periodic fluctuations in product prices, and the market price of products is the basis of corporate profits. In the market economy, the basis of product price formation is supply and demand, not cost, and cost is only the stabilizer of the lowest price of products, but it is not the basis of decision-making. The characteristic of market economy is the average profit of investment in a certain industry. If an industry has a high profit rate, then someone will invest. There are more investors, the profit rate of investment will drop, and so on. For example, the entry threshold for banks is very high, and most countries have strict restrictions on the issuance of bank licenses. Therefore, the periodicity of banks is not due to the high average profit rate of the industry, which leads to the increase of investment in the industry, the increase of enterprises in the industry and fierce competition. However, because banks are the capital channel and the largest indirect financing channel of the whole society, they are closely related to the economy of the whole society. Therefore, a country's economic cycle will inevitably obviously affect the banking industry, leading to the banking industry becoming a cyclical industry. Classification: If it is more reasonable to divide the company's periodicity into industry periodicity and company periodicity, the cyclical industries in the general sense should refer to resources, large industrial raw materials and so on. The periodicity of the industry is the economic cycle, which is manifested in the indifference of products and the relative weakening of brands. The competition of the company is mainly reflected in the control of cost, the change of production capacity and the coincidence of cycles. The periodicity of a company should be reflected in the degree of fit between production capacity and economic cycle, whether the company is expanding or contracting at a high speed, and whether the product structure meets the needs of this cycle. If these two cycles can fit together, such a company will develop at a high speed. Typical examples are the comparison of Yangzi Petrochemical, Qilu Petrochemical and Jihua, and the comparison of Baosteel, WISCO and Hangang. In the same economic cycle, the former company just caught up with the substantial increase in production capacity, while the latter did not. Including industries: automobile, steel, real estate, non-ferrous metals, petrochemical, etc. It is a typical cyclical industry. Other cyclical industries include power, coal, machinery, shipbuilding, cement and raw materials. Simply put, the industry that provides daily necessities is non-cyclical and the industry that provides daily necessities is cyclical. Other industries are called defensive industries. These industrial movements exist because the demand for products in their industries is relatively stable and is not affected by the recession stage of the business cycle card. In a recession, defensive industries may actually increase. For example, food and public utilities are defensive industries. Cyclical stock: Cyclical stock is the largest stock type, which refers to the stock with very high dividend (of course, the stock price is also relatively high) and fluctuates with the ups and downs of the economic cycle. Most of these stocks are speculative. Such stocks, such as those of automobile manufacturing companies or real estate companies, will also rise rapidly when the overall economy rises; When the overall economy goes downhill, the prices of these stocks will also fall. The corresponding aperiodic stocks are those companies that produce necessities. No matter what the economic trend is, people's demand for these products will not change much. Industries with relatively stable incomes such as food and beverage, transportation, medicine and commerce belong to non-cyclical industries. Industry classification: cyclical industries are divided into consumption cyclical industries and industrial cyclical industries. Industries with cyclical consumption include real estate, banking, securities, insurance, automobiles and aviation. Consumer cyclical industry has the characteristics of both cyclical industry and consumer industry. Most of their end customers are individual consumers (including banks and enterprises). Although their brand loyalty is low, they still have a certain brand effect. Although the demand fluctuates, it is generally upward, and it basically belongs to a just-started industry in China, with huge market prospects. Except for automobiles and aviation, they all belong to lighter asset-based enterprises, and they have greater scale flexibility when the industry boom is low. 1. The prices of bank products are relatively stable, and the fluctuation of demand is also small, among which banks with a large proportion of retail sales are less cyclical. The profitability of the banking industry is relatively stable in several industries. However, in the future, China's banking industry will face the gradual narrowing of the spread and the possible marketization of interest rates, as well as the possibility that a large number of enterprises will close down due to the real estate and financial turmoil, resulting in bad debts. 2. Although the price and demand of real estate fluctuate greatly, the fluctuation speed and amplitude are less than those of industrial products, and the products have the characteristics of diversity and differentiation, and the products in some areas have the characteristics of resource monopoly. Leading enterprises have good anti-risk ability, and the industry downturn can bring opportunities for low-cost mergers and acquisitions, and the industry demand is rigid and certain. 3. The price of the securities industry is relatively stable and the demand fluctuates greatly. The special feature of the securities industry is that investors are in the industry and the cycle conversion is obvious. It is easier to judge the turning point of the industry through indicators such as valuation and volume. 4. Insurance is not a cyclical industry, but the existence of investment income will show strong periodicity, and the rapid growth of insurance industry in China will weaken the volatility. If it is not a big bull market or a big bear market, the periodicity of the insurance industry is not obvious. It should be noted that in a fully competitive market environment, the insurance industry is prone to price wars. In order to gain a temporary market share and leading position, irrational policy design may appear. Most policies last for several years or decades, and bad results may take a long time to appear, making it difficult for investors to assess risks. At present, life insurance and Ping An are still in the position of oligopoly competition. With the relaxation of policy control, a large number of foreign-funded insurance companies continue to enter China, the market share of foreign-funded insurance companies is gradually expanding, and the market competition will become more and more fierce. 5. The automobile industry is an asset-heavy enterprise, with fast vehicle model updating and rapid technology updating. The industry is highly competitive, sensitive to oil prices, and there are many factors that affect profits, so it is difficult to judge profits. Moreover, even at the peak of the boom, the profitability of different enterprises is different, and the increase is not necessarily high. It belongs to an industry that may be bad in bad times and not necessarily good in good times. 6. The competition in the aviation industry is fierce, and vicious price competition often occurs (20% to 30% prices can be seen everywhere). The fixed cost is high, the capital expenditure is huge, and the operating cost fluctuates greatly with the oil price and exchange rate. The characteristics of the aviation industry make its profitability low. Real estate, banking, securities and insurance are closely related to daily life. Investors can easily and intuitively feel the changes in the industry, and the factors affecting profitability are relatively simple and more predictable (the closeness between banks and macroeconomics increases the difficulty of judgment), so it is a better choice to invest in cyclical industries. Automobile and aviation are not good investment targets because of their industry characteristics. Industrial cyclical industries include nonferrous metals, steel, chemicals, cement, electricity, coal, petrochemical, construction machinery, ships and equipment manufacturing. These industries are highly related to macroeconomics, which is complex and unpredictable (the predictions of many famous economists are often wrong). Moreover, the product fluctuates greatly and falls rapidly (for example, the shipping price has fallen by 90% in the last two or three months, and non-ferrous metals have also fallen). Demand changes quickly and the cycle is long, and sometimes investors have no time to respond. The product cost is obviously influenced by raw materials, and it is basically a heavy asset enterprise with long input-output cycle. A large amount of capital expenditure at the peak of the industry boom brings huge depreciation and amortization, and profits are extremely sensitive to changes in output. When the industry is in a trough, the flexibility of scale adjustment is small, and there are many unpredictable factors that affect profits, so the profits fluctuate greatly, and it is difficult to judge the inflection point of the cycle. In addition, petrochemical, electric power, oil and other industries subject to government price control may have the possibility of an unexpected decline in profits. The huge fluctuation of industrial products industry also brings high-yield opportunities, but this opportunity is not easy for ordinary investors to grasp. Especially in some long-term industries, such as nonferrous metals, it may take more than ten years to get rid of the wrong rhythm. The products are single and homogeneous in upstream industries such as nonferrous metals, petroleum, coal, gold and steel. Commodity futures market or commodity price index has an intuitive and clear guide to product price trend and industry prosperity (shipping also has a similar index), so it is easier to judge the turning point of the industry according to product price range. The price index usually has a certain operating range. Although this range will change with the passage of time, as long as the data with a long enough period are collected, a general rule can be drawn. The profits of upstream industries fluctuate more and the risks are higher. There are many kinds of products in the middle and lower reaches, and the situation of each sub-industry in different historical periods is very different, so it is difficult to judge the industry cycle.