Recently, many investors have been eager to chase those consistently growing blue-chip stocks and high-dividend stocks, but they overlook another important investment category—cyclical stocks. When the global economy enters a recovery phase, these stocks are most likely to achieve exponential profit growth. If your investment portfolio still performs mediocrely in a favorable economic environment, you are probably missing out on the key opportunity that cyclical stocks present.
What exactly are cyclical stocks?
Cyclical stocks are shares of companies whose profits and revenues fluctuate with the economic cycle. The performance of these companies exhibits a "peak-recession-bottom-recovery" cyclical pattern, rather than linear growth.
The economic cycle is typically divided into four stages:
Recovery: The economy rebounds from a low point, with increasing corporate orders and improving profit margins
Peak: Economic growth reaches its zenith, with maximum corporate revenue and profits
Recession: The economy begins to decline, and companies face