Cyclical stocks, in brief, are the stocks of those companies whose earnings are strongly tied to the business cycle. This means that the prices of the stocks move up sharply when the economy turns up, move down sharply when the economy turns down.
Examples:
Cyclical companies: Caterpillar (CAT), US Steel (X), General Motors (GM), International Paper (IP); i.e., makers of products for which the demand curve is fairly flexible.
Non-Cyclical companies: CocaCola (KO), Proctor & Gamble (PG), and Quaker Oats (OAT); i.e., makers of products for which the demand curve is fairly inflexible; after all, everyone has to eat!
Article Credits:
Contributed-By: Bill Sullivan