Cyclical Stock
A cyclical stock’s earnings move with the economic cycle — cheap at the peak and expensive at the trough if you use a spot multiple.
Definition
Cyclical Stock refers to cheap at the peak and expensive at the trough if you use a spot multiple. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Equity risk premia compress or expand with earnings paths and factor regimes. When cheap at the peak and expensive at the trough if you use a spot multiple shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what cyclical stock is saying. If cheap at the peak and expensive at the trough if you use a spot multiple moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Separate index beta from residual; know the sector and factor loadings of the claim. Prefer a short written null hypothesis for Cyclical Stock: what would falsify the current reading in the next window?