What do you think about cyclical stocks? What are cyclical stocks?

A cyclical stock is one that pays a very high dividend (the stock price will not be too high comparatively) and rises and falls with the boom and bust of the economic cycle. Cyclical stocks are typically represented by resource stocks. The so-called economic cycle, also known as the business cycle or business cycle, is a phenomenon that occurs periodically in the operation of the economy, alternating between economic expansion and economic contraction, and the cycle is repeated. The economic cycle is composed of downturns, recoveries, climaxes, and downturns, and the cycle forms the so-called economic boom and economic downturn.

In each round of economic cycle fluctuations in the period, will inevitably bring the relevant sectors of the market. Economic cycle downturn, low resource consumption, poor corporate earnings, suffering. Economic cycle recovery, resource consumption rose, began to a little sweet. Economic climax, industrial expansion, resource consumption, profitability levels are great. Economic recession, resource consumption decline, enterprise inventory, price cuts, reduced profitability. Very simple reasoning, follow the general trend fluctuations.

However, there are exceptions, the domestic supply-side reform, in the supply side of the article. Cyclical industries, under the conditions of supply and demand imbalance, there is a significant improvement in performance. Therefore, our judgment of the cyclical industry, can not be limited to the traditional demand-side judgment, if the supply side of a huge change, as will bring a huge impact on the cyclical industry!

In general cyclical stocks as the name suggests is to operate in accordance with a certain period of time to have the opportunity to gain the stock. For example, steel, coal, electricity, non-ferrous metals, environmental protection stocks. They are all stocks with certain cyclical characteristics.

Take coal as an example, in winter, the northern heating supply demand increases. This will lead to an oversupply of coal to provide heating, which will ultimately drive up the price of coal, which will make the price of coal stocks rise. And this will also bring a certain chain reaction, it will lead to it related industries also rose, for example, environmental protection stocks rose is with the coal stock rise has a certain relationship.

So investing in cyclical stocks, we must understand its cyclicality, but also understand the industry related to it in order to grasp the benefits.