Is investing in cyclical stocks in 2025 real or not? Satisfactory profits are achievable!

If you find that your stock portfolio is not growing as expected despite the economic recovery, it may be because you are missing a crucial piece in the cyclical stocks group. Many investors tend to focus on growth stocks and dividend stocks, but when the economy expands, cyclical stocks can deliver brutal returns. In this article, we will reveal 6 key stocks to watch closely and recommend investment strategies for you.

Learn Before Investing: What Are Cyclical Stocks?

Cyclical stocks are securities whose prices and profits tend to fluctuate with changes in the economy, driven by supply and demand factors. The movement of these stocks is not fixed but follows the natural rhythm of each industry, sometimes annually, sometimes over several years.

The economic cycle phases that influence these stocks are four main stages:

👉 Recovery (Recovery): The economy begins to emerge from a downturn, demand for goods and services increases, and company profits are strong.

👉 Peak (Peak): The economy reaches its peak, and stock prices often soar accordingly.

👉 Recession (Recession): The economy dips, demand decreases, profits shrink, and stocks start to decline again.

👉 Trough (Trough): The crisis period, stock prices are at their lowest, a golden time for brave investors.

6 Prominent Cyclical Stocks for 2025 to Watch Closely

1. Nvidia (NVDA) - Chip and AI King

This company dominates 80% of the AI chip market due to increased investments in Data Centers and processing technology. Profit is expected to grow by 35% in 2025.

Although the P/E ratio is 40, the PEG Ratio is only 1.2, indicating value. The company has over $20 billion in cash reserves and virtually no debt. This is a strong point many companies envy.

2. Caterpillar (CAT) - Building the Future

A global heavy machinery giant poised to benefit immensely from the US$1.2 trillion Infrastructure Bill, along with rising demand from Asia and South America.

P/E is only 15, with 25 years of continuous dividends, and a backlog of $30 billion under construction, making CAT a heavyweight gem for cyclical portfolios.

3. JPMorgan Chase (JPM) - A Bank That Will Improve When Interest Rates Drop

The Fed has started lowering interest rates at the end of 2024, with expectations of 3-4 cuts in 2025. This bank will be able to lend more, with profits increasing by 11%.

Price-to-Book ratio is just 1.8, with ROE at 16% and CET1 Ratio at 14.5%, providing stability.

4. ArcelorMittal (MT) - Steel Is Valuable Again

A global steel producer will have a new good day as infrastructure investments and stimulus in China pick up. Steel prices are expected to rise 15-20% with global expansion.

P/E is only 5, with a Free Cash Flow Yield of 15%, enabling share buybacks and consistent dividends. Additionally, they are investing in clean steel to reduce CO2 emissions by 30% by 2030.

5. LVMH (LVMUY) - Luxury Is Always Valuable

A luxury goods empire with 75 flagship brands, including Louis Vuitton and Dior, will benefit from China’s recovery and the continued purchasing power of the wealthy.

Gross profit margin is 65%, sustained over many years. Profits have grown for 10 consecutive years. Bernard Arnault, the founder, owns over 40%, showing strong conviction.

6. Lennar Corporation (LEN) - First Home of the Next Generation

A leading US homebuilder will see new life as mortgage rates drop below 5.5%, combined with higher average home ages and Millennials entering first-time homebuying age.

P/E is only 10, with land reserves of over 300,000 plots, purchased during a market downturn. Profit margin is 21%, and they build homes 15% faster than competitors.

Industries Others Should Know

Semiconductors: ASML, MediaTek, SK Hynix, Qualcomm are benefiting from AI investments. The market is expected to grow 15% in 2025.

Automobiles: Volkswagen, Hyundai, BMW, BYD see global sales up 8% compared to last year.

Banks: JPMorgan, Goldman Sachs, Bank of America will benefit from the global market recovery.

Open an Account and Start Appropriately

Everyone can understand cyclical stocks, but real investing requires practical experience in analysis, not just theory. Practicing trading with virtual money before using real funds as a member reduces risks from ignorance.

Opening an account on a trading platform is easy, taking only a few minutes via web or iOS/Android apps. You can access top stocks and profit from both bull and bear markets.

Characteristics of Cyclical Stocks to Know

Advantages

✅ High Profitability: High volatility also means high opportunities. Skilled investors can make significant short-term gains.

✅ Trend Prediction: Economic cycle data helps make real-time investment decisions.

✅ Diversify Portfolio: Combining cyclical stocks with other types reduces overall risk.

Disadvantages

❌ High Volatility: Weak-hearted investors may face losses in the short term.

❌ Requires Expertise: Deep understanding of economic cycles is necessary to time investments well.

❌ Additional Risks: Government policies, global situations, and market events can impact stocks.

❌ Not Suitable for Long-Term Holding: Volatility may not be appropriate for investors seeking wealth preservation.

Cyclical Stocks vs. Defensive Stocks: What’s the Difference?

Defensive stocks or Non-cyclical stocks operate steadily regardless of economic conditions because they produce essential goods that consumers always need, such as soft drinks, medicines, utilities, etc.

Examples of defensive stocks: Coca-Cola, J&J, Tesco, Diageo, NextEra Energy.

Summary of Stock Selection

Understanding stock types is key. Each requires different trading strategies. Cyclical stocks demand calculation and relationship analysis between business cycles and seasons. Some investors recognize these cycles and profit immensely, while others may lose their portfolios. Deep business analysis helps better time investments.