This article originally appeared Sept. 6, 2013, on Real Money. To read more content like this, + see inside Jim Cramer's multi-million dollar portfolio for FREE Click Here NOW.I have found that as an investor I have to watch the allocation to cyclical stocks within my portfolio much closer than those portions I put in income stocks or steady growth plays. Earnings in cyclicals can swing wildly, depending on economic growth, changes in demand within a particular sector or company specific events. Sentiment on cyclical sectors can also change rapidly, which makes these stocks high beta plays. The upside is these types of stocks can rise quickly on any improvement within any of these areas. This week a couple of my cyclical plays picked up some positive catalysts. Louisiana-Pacific (LPX - Get Report) is a leading manufacturer of quality-engineered wood. It is the market leader in producing oriented strand board that has been replacing plywood for use in housing construction. It is one of my plays on the housing market, which is continuing to recover. The company announced on Thursday that it is acquiring Canadian-based Ainsworth Lumber for $1.1 billion. This transaction has several positives. It was done at a fair price, it gains LPX exposure to Asia and it also should trim the extreme volatility within the pricing for OSB products. The stock shot up better than 10% Thursday as investors applauded the acquisition. DA Davidson upgraded the stock from "neutral" to a "buy", saying that this acquisition will immediately be accretive to earnings. I would expect other analysts to follow suit. Revenues were tracking for better than 20% growth this year prior to the acquisition. Earnings look like they will more than triple this year over FY2012 and this stock should do well as long as the housing market continues to improve. Freeport McMoRan (FCX - Get Report) is a giant copper and gold miner that has had a rough go of it over the last year, like most players in the sector. However, the company's prospects seem to be improving. First, the stock looks like it has put in a bottom just below $28 a share recently. More importantly, the company is finally reopening its giant copper mine in Indonesia after it was closed for nearly four months. Chinese economic growth also looks like it is doing better recently which should lift all major miners. Finally, gold prices have bounced off their recent low of about $1200 an ounce, and that should be beneficial as well.
Two Cyclical Stocks on the Move
Sep 07, 2013 | 01:50 PM EDT
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV