I just realized I missed out on a lot of cyclical stocks. While the market is recovering, my portfolio seems to be withering. After studying it, I understand that cyclical stocks are stocks whose prices and profits fluctuate according to the economic cycle, not stocks that grow steadily.

Cyclical stocks are stocks that benefit most from economic recovery, such as during the Recovery phase when prices surge, but decline during Recession. Examples include semiconductor stocks, car manufacturers, banks, steel, and real estate.

Looking at the current market details, Nvidia still dominates over 80% of the AI chip market. Its P/E ratio is 40 times, but the PEG ratio is only 1.2, which is considered reasonable. Caterpillar benefits from infrastructure investment plans, with projected revenue growth of 8-10% in 2025, at a P/E of only 15 times. Banks like JPMorgan Chase will benefit when interest rates decrease.

For the steel industry, ArcelorMittal has a P/E of only 5 times, very low compared to the average. Its Free Cash Flow Yield is as high as 15%. LVMH in the luxury goods sector benefits from the purchasing power of the wealthy, which has never disappeared, and the recovery of China. Lennar in real estate expects mortgage rates to fall below 5.5%, increasing demand for new homes.

I now understand that cyclical stocks are tools that require caution and in-depth analysis. The advantage is high profit potential, especially during economic recovery. The downside is high volatility. One must understand the economic cycle and risk factors, making them unsuitable for those with low tolerance.

Unlike defensive stocks like Coca-Cola or JNJ, which perform steadily, cyclical stocks need the right timing. Entering during the economic recovery phase often results in significant price increases, but entering near the cycle's peak can lead to rapid declines.

The key thing to know before investing in cyclical stocks is to monitor the global economic situation, central bank policies, interest rates, and market demand. It’s not about buying and holding for a long time but having a clear entry and exit plan. Those with experience in market analysis and risk management can make more profits.

Once you understand the nature of cyclical stocks, it’s good to study current trends, such as China's recovery, infrastructure investment plans, and AI development, which are good opportunities to consider these stocks.