Cyclical stocks could have a strong year ahead of them
The economy moves in waves, and it is always important for investors to recognize the current stage in the business cycle in order to take smarter strategic moves. Expansion, contraction, lows, highs, and rallies all have different effects on financial markets, each of which can lead to different opportunities in particular stocks. At the start of the new year, many analysts believe the economy is in an expansion phase given the economic reopening, improving unemployment rates and strong corporate earnings. This bodes well for cyclical stocks, which tend to do reasonably well during this phase of the business cycle.
If you are positive about the economy and believe that the worst effects of the pandemic are behind us, topping up stocks of the most fascinating cyclical stocks could be a wonderful step towards 2022.
That’s why we’ve put together a list of 3 compelling cyclical stocks that you should buy right now. Let’s take another look below.
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Alcoa Corporation (NYSE: AA)
Cyclical commodity stocks like Alcoa Corporation performed strongly in 2021 and could continue to rise over the next year, considering how important aluminum is to the overall economy. Keep in mind that the company has had strong demand in all of its major end markets, which has resulted in strong revenues over the past few quarters. Recently, Alcoa reported third-quarter sales of $ 3.1 billion, up 10% from the previous quarter, and set a record quarterly net income of $ 337 million. These are the results long-term investors want to see, and Alcoa’s management expects more of them in the fourth quarter.
It’s also worth noting that Alcoa recently announced a quarterly dividend of $ 0.10 per share and initiated a $ 500 million share buyback program, which is still trading at an attractive price-to-earnings ratio of 9.72, which makes him makes it a very attractive cyclical name to be considered right now.
Another attractive cyclical name to consider at this time is the world’s leading construction equipment manufacturer, Caterpillar. The stock has been an underperformer for several months, but investors shouldn’t write off the heavy equipment maker’s uptrend in 2022. Caterpillar could benefit from an increase in construction next year thanks to infrastructure bills and a sustained rebound in oil prices, which could lead the company to sell more engine and pump products to its oil and gas exploration customers.
Caterpillar also has a rock solid record of helping the company become a dividend aristocrat. Most recently, the company increased its dividend payout by 8%, which should signal to investors that management is h -py with the company’s financial condition for the new year. Finally, the fact that Caterpillar reported adjusted earnings per share of $ 2.66 for the third quarter, up 175% year over year, is an indication that the company is seeing a recovery in pandemic-hit businesses and that cost-cutting measures are taken is paying off by and large.
Bank stocks like JP Morgan Chase are considered cyclical as their earnings tend to coll -se during recessions. On the flip side, a strong economy with high consumer spending tends to be a good thing for banks. Keep in mind that the US Federal Reserve has been hinting at at least three rate hikes in 2022, which is another reason to consider adding shares in JP Morgan at this point. According to the consensus price targets of analysts at MarketBeat, the stock has an average price target of $ 173.72, implying over 9% of the uptrend from current levels. It wouldn’t be surprising to see financial stocks start the year strong, and with JP Morgan trading right on the 200-day moving average, investors have a logical entry point to long-term buying.
As one of the world’s largest diversified banking firms, JP Morgan is active in the investment banking, financial services and wealth management sectors. It’s a quality name in the financial sector that investors are h -py to own over the long term, especially given the end of government stimulus measures and an ongoing economic recovery on the horizon. With a dividend yield of 2.52% and a forward P / E of 10.58, this is a high quality name that could be a steal at its current level.