Turning the Tides with Cyclical Investing

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Attention Class! Today let’s learn a thing or two about Cyclical Investing. What is it? How does it work? What are the basic fundamentals one needs to know when getting into Cyclical Investing.

What is Cyclical Investing?

Cyclical investing is investing in stocks belonging to sectors which are under-performing currently & are available at bargain prices and cashing out when these sectors sees a turnaround with economic growth.

What are examples of cyclical stocks?

Cyclical stocks represent companies that make or sell discretionary items and services that are in demand when the economy is doing well. They usually include restaurants, hotel chains, airlines, furniture, high-end clothing retailers, and automobile manufacturers.

Let’s simplify this a little more

For example imagine you are on a Giant Wheel at a carnival. For a moment you are at the bottom, close to the ground but a moment later you are at the top, enjoying the view and having a blast. Similarly, Cyclical Investing is investing in sectors that are currently underperforming (when on the ground) and cashing out when these sectors see a turnaround with economic growth (when at the top).

Did you know that Aurum Capital has its own Cyclical Investing smallcase?

With over 2 years on smallcase their performance tells an incredible story

Should you invest in Cyclical stocks?

Interestingly, cyclical stocks make up of nearly three quarters of our stock market. The term cyclical stocks just doesn’t mean the metal stocks cycle that we have recently seen, it includes sectors like autos, commodities, capital goods, chemicals, and even defense. It is safe to say that our ENTIRE STOCK MARKET IS CYCLICAL.

Hence, it becomes of paramount importance to know how to play these market cycles and make smart returns from them.

How we Invest in Cyclical stocks?

In our long experience in investing, we have developed a framework, to take the benefit of market cycles by timing it to a certain extent. We need not get in at the bottom cycle nor get out at the top. The key to our success is to get the direction right.

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Disclosure: Aurum Capital does not provide a model portfolio but a list of well researched stocks. If equal weightage was applied to the list of stocks, the performance would have been as above. The performance is only for illustration purpose and there is no recommendations for allocations. Allocation decision remains with the subscribers. Past performance is no guarantee for future results.

Jiten Parmar

Jiten is an entrepreneur and a passionate long-term equity investor. Jiten has been investing in the market since 1993. He started investing in Indian equity market since 2002 and prior to that he invested in the US markets.

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