Introduction
Traditionally, most of my analysis on Seeking Alpha has focused on how to avoid losses and how to profit from the price cycles of classic cyclical stocks. There is another group of stocks, however, whose stock prices and earnings fluctuate far less than the classic cyclical stocks I have traditionally written about. While these stocks aren't as cyclical as a "classic cyclical," they can still be subject to large swings in sentiment and can go through what I call "sentiment cycles." Recently, I have been adopting some of the techniques I've used with classic cyclicals and applying them to sentiment-driven cyclicals. Today's stock is one of those.
One of the major assumptions I make for both approaches is that history is the most reliable guide to the future. My experience has been that 80% of the time, even if we looked at nothing else, a stock will behave in a similar manner as it did the previous cycle or two unless there is a disruption to its core business. For this reason, I don't rely much on predictions of future earnings or sentiment that aren't supported by their existence during past cycles. That doesn't mean that "this time is different" isn't true sometimes - it just means that my analysis isn't counting on this time being much different. That said, if I think a stock is currently a "Buy" based on my 10-year, full-cycle analysis, before I invest I will examine the forward-looking trends and narratives more carefully to make sure there aren't major changes in the works that could affect the business.
The main differences you'll find between my analysis and others' is that: 1) I focus on a clear 10-year time frame and the compound annual growth rate (aka CAGR) one might expect over that period of time; 2) I assume we will
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