One logical flaw is in many posts. My thoughts are below on choosing cyclical:
Cyclical do best in good time where debt is higher. Higher debt is often due to creating extra capacity. In doom time excess capacity is not utilized and interest cost wreak havoc on bottom line so they do very miserably on stock price. BUT when tide turns such companies have best capability to fulfill the demand and their bottom line rises much higher than those whose capacity is fixed and BS is clean. Mkt loves such sudden jump in profit and rewards the stock well.
Commodity demand has some connection with interest rates. Lower rates and rising demand motivates commodity player to further enhance the capacity and often it leads again to excess capacity and cycle reverses again!
mid cap cement are one of the best cyclicals to play for…just keep an eye–opportunities come every 3-4 years
this sector has consolidated already…with major foreign players controlling the markets apart from aditya birla group…
i love to go for businesses where any other player is ever ready to buy it…cement plants one of them
even in uncertain times /poor infra growth…they are running at 70% cap…
in years to come this is bound to increase…some of best mid cap players are
india cement(market cap 1700 cr with 1000 cr cash flow per year)…low valuation…major beneficiary in a upcycle due to good capacity built up already…debts can be wiped off in 2 years of good cycle with 2 years profit…
dalmia bharat–(looking for pan india presence…young management who want to prove themselves…so can go a long way…consolidating its cement divisions…shree cement executive roped in recently…etc etc)this co can go all the way what shree cement did since last 10 years…things are on the move for this company…with 18 mt capacity under control would be a major beneficiary in a up cycle…
if ashok leyland looks cheap at 5000 cr mkt cap…why not sml isuzu–mnc company
sml isuzu at such low market cap reminds me about eicher motors when i identified at 700 cr market cap…swaraj mazda and eicher motors had similar products 10 years down the line…however things changed for eicher with entry into larger trucks…
sml isuzu needs a slot in any portfolio for people looking consistence and growth and also want to participate when economy recovers…one never know what returns such companies will give year on year…but returns are for sure with no risk…
in stock markets people move with performance…once stock starts performing all come in…sml is a sleeping giant…wont be surprised to see interest coming even after it moves from 300 to 1200…because at 1200 also it could be a multibagger as mkt cap will still be very low
Are anyone tracking cement stocks… With BJP projected to get 200+ seats, NDA may form the next government… Confidence coming back, investing/infra spending increasing economy may show an uptick after a few quarters lag…
Other than keeping an eye on retail prices, capacity utilization and other factors how do seniors/veterans precisely find the cycle turning…
Most of the cement players are adding new capacities…
Most of the times its difficult to time cyclical… We will miss till we spot and invest… So can we invest when the sector is beaten down and wait for a turnaround…
Sugar cycle is already showing sign of turning. Sugar output is expected to be lesser this year, export subsidy to export raw sugar to bring down inventory and crop diversion to other uses. Renuka Sugar stake is picked up by Wilmar group. So, looks like good time to buy Sugar stocks.
What about 1200 cr of arrears due to farmers from sugar companies. The increase in sale may not translate to the corresponding increase in bottom line. Also the farmer association have bee pushing for higher cane prices.
Sticking to “high quality cyclical” provides safety during bearish market. They provide better risk adjusted return over other cyclical stocks.
I selected 10 random"high quality cyclical" known in last bull phase 2002-2007from various industries to understand the picture. There must be debate over selectionbut for now I have selected diversified stocks here.
**Result : **After equal weighatage to all selected 10 stocks portfolio in 2002 results 77 % CAGRin 6 years. ( average 30x return in 6 years from 10 stocks )
Attachment included.
**Assumption :
**
We selected complete bull phase from bottom to top; which is difficult to predict.
Strict selection of diversified"high quality cyclical" is important.
_
_
My thought is to create list of 10"high quality cyclical" for Bull Run. We can continue in same thread or create separate thread for"high quality cyclical for next 6year"
I was trying to analyse Breweries and Plastic sector to see if they are cyclical.
My argument is if it has to be non cyclical then it can correct for 1-2 years but there should be no 5 year period with negative returns.
For Breweries we can say it’s cyclical but seems like sector wise generalization may not be such a good idea for plastic sector.
Hi @hitesh2710 ji
could please advice is it right time to enter in hotel cycle i had made small write up shared below could please find time for your preview
It is on seperate thread could you please advice
regards
@hitesh2710 - perhaps we should talking about the topic again. Somehow i think cyclical business are dependent on long term focus areas of govt and definately global conditions.
Have heard many times the sector that was hot in last bull cycle does not work in next.
What contradicts is the rise we have seen in banking, IT, Chemical ind
