Course 408: Cyclical Stocks
Conclusion: Get 'Em while They're Cold
In this course
1 Introduction
2 How Is the Company Doing Now?
3 How Wildly Do Sales and Profits Fluctuate?
4 How Leveraged Is the Balance Sheet?
5 Does the Company Consistently Generate Positive Cash Flow?
6 How Steady Are the Company's Dividends over a Cycle?
7 Is the Firm Diversified Geographically and by Product Line?
8 Is the Long-Term Trend in Sales and Profits Upward?
9 How Has the Stock Performed?
10 How Expensive Is It?
11 How Expensive Is the Company Based on Normalized Earnings?
12 How Does the Price/Sales Ratio Compare with Historical Levels?
13 Conclusion: Get 'Em while They're Cold

With mild cyclicals--the ones that don't do too badly in a recession--you don't have to worry much about the timing of your purchase. General Electric GE may slow down in a recession, but it's not likely to lose money. With deep cyclicals such as United Technologies, however, buying when the company is earning peak profits may mean you'll have to wait a long time before your investment breaks even. We have seen how badly United Technologies gets hit in economic downturns, even if the company has many strengths (consistently positive cash flows and dividends, for example) that a lot of cyclicals don't have. With United Technologies' stock trading near its all-time highs, it is a hazardous time to take the plunge.

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