No. of Recommendations: 6
It's been many years since I read Beating the Street, but I remember one piece of wisdom regarding cyclical stocks.

In cyclical industries a well-run company will weather market downturns, seeing their business rebound when the market swings upward. However a well-run company that also manages to gain market share during the downturn will be in position for much faster growth on the market's upswing. Lynch gave a numerical analysis showing how this works and Applied Materials' stock subsequently reflected this effect during the 90s.

Here's a question I'm working on, and inviting comment: Who's gaining market share in the housing industry, which is now in a downturn? Might be too soon to tell, but it's definitely not too soon to investigate!

Print the post Back To Top
No. of Recommendations: 0
Don't know, but I'd maybe look for companies with more cash than debt and good FCF (two other things Lynch always sniffs before acting). They'd likely be in a position to acquire more market share during the downturn, thus being poised for the rebound.
Print the post Back To Top
Advertisement