What are cyclical stocks? Any industry has cycles, and industry cycles generally have a budding period, a growth period, a mature period, and a recession period. But in A shares, resource-based industries are generally called cyclical industries, such as steel, coal, and nonferrous metals. Why are they cyclical industries? Because they are traditional industries with no growth potential. Some are just recessions and flashbacks on the way. Not the necessities of life that people need, only when they are needed, they can be rotated. These are cyclical stocks.
The characteristics of cyclical stocks are that the products are not geographically specific, the products are not differentiated, the technical content of the products is relatively low, and the products themselves are easy to obtain. Because cyclical stocks themselves fluctuate according to the market cycle, we can often see these individual stocks go up in their own economic cycle independently of the overall market trend. In this regard, we must also pay attention to conforming to the market sentiment and policies in the actual operation of cyclical stocks, otherwise it is easy to buy before the turning point of the cyclical stock industry.
- Products are not geographically specific, such as steel, coal, paper, and cement. Basically, they can flow nationwide, so their demand is also determined according to the country and the world.
- There is no difference in products, such as non-ferrous metals, coal, pork, chicken and other products. Basically, the products of various companies across the country are similar, so there will be overall competition.
- It is easy to expand production capacity, such as agriculture and finance. As long as the policies are in place, it is very simple to expand operations in these industries.