The biggest pitfall for new investors is not knowing the difference between a cyclical stock and a growth stock

If you only look at 2-3 years earnings, a cyclical stock on a uptrend can very much look like a growth stock

To tell the difference, always look at the past 10 years earnings to see the complete picture

A true growth stock is one that shows earnings growing year after year over the 10 year period, example sheng siong super market opening new stores year after year, during recession the earnings are maintained

A cyclical stock is one that shows a quick drop in earnings during bad times over the 10 year cycle,
Example keppel corp, during the oil crisis earnings plunged more than 50% as marine related contracts are defaulted

Some cyclical stocks are more risky than others
Some only show a small decline in earnings during down cycle like banks
Some can turn into losses like what we seen happening to ezra,swiber in marine

Generally these industries in my view are considered very much cyclical

Marine
Manufacturing
Property development
Commodities

To be sure, always look at their 10 year earnings track record

The best growth stocks are the one that can continue to growth be it reccession or bull, they sell a basic need and consumers cannot cut it even during reccession, example sheng siong super market selling rice, drinks, meat, vegetable all these are basic needs that wouldnt be cut

Check your portfolio today and group your stocks into growth, dividend, cyclical

I typically hold 2/3 of my portfolio in growth stocks and 1/3 of my portfolio in dividend stocks

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22 likes 2 comments
Snorlax

Cyclical stocks relies on market cycle and macro sentiment one. Yes I do hold cyclical stocks based on the trend on the market and not intend to hold v long term/buffett style huan.

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