The Cycle Business

JJC explains which stocks are really cyclical and which aren't.
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Not getting through to everybody on this cyclical thing. Let's go over some examples:

  • McDonald's (MCD) - Get Report: Not really cyclical, as people will go there whether the economy is good or not.
  • Union Carbide (UK) : Incredibly cyclical, needs worldwide economic growth to explode to the upside.
  • Microsoft (MSFT) - Get Report: Classic growth stock that sells a huge amount of product with or without worldwide growth: anticyclical.
  • Phelps Dodge (PD) - Get Report: Pathetically cyclical, depends entirely on the price of world copper to compute its earnings, and copper gets used more often when economies are strong.
  • America Online (AOL) : No cyclicality. Again, a true growth stock, not dependent upon commodities or worldwide demand. (Although if economies grow superfast, arguably you will get more members, but negligible.)
  • Kmart (KM) : Cyclical in that it needs a strong economy to crush its numbers.
  • Wal-Mart (WMT) - Get Report: Not cyclical, does well whether economy is strong or not.
  • AlliedSignal (ALD) : Definition of cyclical, with all its businesses leveraged to worldwide growth (even though it has smoothed things out well).
  • Merck (MRK) - Get Report: Definition of growth, with all businesses leveraged to economy -- disposed of (used to own a bunch).

Hope that helps.

Random musings

: Understand from my disclosure that I don't necessarily believe that it is curtains for everything not cyclical. That would be just plain wrong, given a benign bond environment that will continue to be benign until we get to 6% on the long bond.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At the time of publication the fund was long AlliedSignal, America Online, Microsoft and Wal-Mart, though positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending an email to

letters@thestreet.com.