A cyclical company is a firm whose priceWhat are value stocks? A value company is a company that app... More is closely aligned with economic fluctuations. For example, during periods of economic growth, cyclical companiesWhat are value stocks? A value company is a company that app... More will do well but during downturns they will see their earnings decline.
What type of companies are cyclical companies?
In contrast to (which usually offer essential products or services, such as food and utilities), cyclical companies normally offer non-essentials such as cars, holidays or other luxury items.
When times are hard, people may decide that they cannot afford to buy a new car or go on holiday, but they will continue to buy their everyday essentials.
What should investors be aware of when investing in cyclical companies?
need to be aware of the way in which cyclical companies and industries react to and are affected by changes in the economic climate. They can then use this knowledge to make sensible decisions.
Some investorsWhat are value stocks? A value company is a company that app... More choose to invest in cyclical companies just before an economic growth period begins, enabling them to make the most of an increase in the company’s share priceWhat is price? The price is the measure of the value of good... More.
However, although these companies can perform well during positive conditions, it might be more sensible to invest in defensive companies when things take a turn for the worse. Defensive companies will offer greater stability for your investmentInvestment is the commitment of money or capital to purchase... More during such periods.
Where can you find information about cyclical companies?
You can monitor the financial press to find out the latest information about cyclical companies.
