I just noticed that many people are stuck chasing growth stocks and dividend stocks all the time, but they miss out on stocks that can actually make huge profits during an economic recovery. That is the stock cycle itself. If the economy starts to grow but your portfolio isn't moving, there's a high chance you're missing this opportunity.

What exactly is a stock cycle? Simply put, it refers to stocks with high volatility, where the company's revenue and profits fluctuate in cycles. It's not unusual for these stocks to have soaring prices during economic expansion and to retreat when the economy slows down. This pattern is driven mainly by the demand and supply mechanism. Sometimes, the cycle can last 5-10 years, sometimes shorter.

When investors talk about stock cycles, they often point to industries such as maritime stocks related to shipping, oil refining stocks, agricultural stocks, steel stocks, petrochemical stocks, and coal stocks—all sharing a common trait: a close relationship with the overall economic situation.

The economic cycle has several main stages you should know: Recovery is when the economy begins to rebound from slowdown, during which cyclical stocks often surge. Peak is the highest point of growth. Recession is when the economy starts to decline, and Trough is the lowest point of the cycle.

Let's look at some cyclical stocks that seem interesting right now. Nvidia (NVDA) remains strong because the AI and Data Center industries continue to grow, holding over 80% of the AI chip market, with profits expected to grow over 35%. Although the P/E ratio is high at 40, the PEG ratio is 1.2, which is considered reasonable. The company has over $20 billion in cash and virtually no debt.

Caterpillar (CAT) is another one to watch. The giant construction equipment manufacturer benefits from global infrastructure investment plans, especially the U.S. Infrastructure Bill worth $1.2 trillion. Revenue is expected to grow 8-10%, with a P/E of only 15, and a backlog of $30 billion. CAT looks very attractive. It has paid dividends for over 25 years and has continuously increased them.

In the financial sector, JPMorgan Chase (JPM) is expected to benefit from a declining interest rate environment. As loans grow, profits will follow. With a Price-to-Book ratio of only 1.8 and an ROE of 16%, JPM seems undervalued. Its CET1 ratio is high at 14.5%, indicating strong financial health.

ArcelorMittal (MT), a global steel producer, is expected to benefit from the resurgence of manufacturing. Steel prices could rise 15-20% due to infrastructure investments and China's economic stimulus. MT has a P/E of just 5, which is very low. Its Free Cash Flow Yield is 15%, allowing for share buybacks and steady dividend payments. It also invests in clean steel technology to reduce CO2 emissions.

LVMH (LVMUY), the luxury goods empire with over 75 brands including Louis Vuitton and Dior, has the advantage that the wealthy's purchasing power remains strong even during downturns. With a gross profit margin of 65%, LVMH has shown continuous growth over 10 years. Founder Bernard Arnault owns over 40%, reflecting strong confidence.

Lennar Corporation (LEN), a leading U.S. homebuilder, could benefit from falling interest rates. Mortgage rates are expected to drop below 5.5%, combined with Millennials entering first-time homebuyer age. LEN has a P/E of only 10, with land reserves for over 300,000 development plots bought cheaply during the market downturn. Its profit margin is 21%, and it builds homes 15% faster than competitors.

In the semiconductor industry, ASML Holding, MediaTek, SK Hynix, and Qualcomm are poised for rapid growth. Experts forecast this market will grow by 15%. The automotive sector, including Volkswagen, Hyundai, BMW, and BYD, could benefit from the consumer vehicle cycle, with global car sales expected to increase by 8%.

Bank groups like Goldman Sachs and Bank of America are also likely to benefit from the global economic recovery.

The key thing to understand before investing in stock cycles is that these stocks are highly volatile. Their prices directly follow the economy: when the market grows, prices go up; when it slows, prices fall. This is a double-edged sword—on one side, high profit opportunities; on the other, risks that must be tolerated.

The advantage of investing in stock cycles is the potential for high returns. Skilled investors can make significant profits in the short term. It also helps in predicting long-term market trends and building a diversified portfolio.

However, the downsides include high volatility, meaning investors must endure short-term losses. It requires time and effort to analyze, and additional risks from government policies or global economic factors. It may not be suitable for those seeking long-term wealth preservation.

In contrast, non-cyclical stocks, also called defensive stocks, typically produce essential goods and services such as Coca-Cola, Johnson & Johnson, Tesco, Diageo, and NextEra Energy. Regardless of the economic situation, demand for these products remains steady.

In summary, if investors understand stock cycles and timing, investing in these stocks can be a good way to profit during economic recovery. The key is to understand how the business relates to the economic cycle to choose the right entry points.