The Cyclical-Stock Party Is Ending

Another trouble spot is Ashland (ASH - commentary - Cramer's Take). Like ConocoPhillips, it had a blah quarter, when profits didn't budge. In fact, the only reason EPS improved was because there were fewer shares. But this stock also has drifted higher. Whenever investors bid up a stock just because it's in a hot sector, that's usually a good time to exit the party, which in this case is the cyclicals. I like to track the CYC/S&P 500 ratio. On Wednesday, it hit 0.715, which is the highest reading in 30 years.

As I said, the time to get out is now.

Exit Cyclicals, Enter...

Now, let's look at what's being left behind in the non-cyclical areas. These are the sectors that are barely affected an economic mash-up. People generally don't cut back on their chewing purchases in a recession, for instance, and beer sales probably increase.

One slacker sector has been health care. Since the beginning of 2006, the market value of the S&P 500 has increased by $2 trillion, but the health care sector has chipped in just $66 billion, or about 3.3%, which is well below its sector weighting of 12%.

One mid-cap health care stock that I've got on my radar is Clearwater, Fla.-based Lincare Holdings (LNCR - commentary - Cramer's Take). Lincare is in the oxygen and respiratory therapy biz. You may have seen its portable oxygen tanks which, in Florida, are sort of like iPods for the alte kake -- old-timer -- set.

I'm not claiming to have any special insight here. I've just run the numbers on Lincare, and it's a good stock at a good price. The shares are currently going for 13.6 times next year's estimate, which is about a 13% discount to the market. EPS jumped 24% last quarter and is expected to rise 16% this year. I don't own it, but in a market where Yahoo! (YHOO - commentary - Cramer's Take) can fetch $28, Lincare at $40 ain't bad.

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At the time of publication, Elfenbein had no positions in stocks mentioned, although positions may change at any time. Eddy Elfenbein runs the financial blog, CrossingWallStreet.com, and has several years of experience in the financial newsletter industry. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Elfenbein appreciates your feedback; click here to send him an email.