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I will keep charging through The Bullhunters Guide to the US Stock Market as we get into the DJIA Consumer Cyclicals and Non-Cyclicals today. Here we go with another excerpt…
DJIA Consumer Cyclicals
These stocks are easy to understand becasue most of us are intimately familiar with them. It only makes sense that Disney, Home Depot, McDonalds and Wal-Mart would do best when the economy was strong and therefore their customers had more money to spend.
Of these stocks the two retailers are on the opposite ends of the cyclical spectrum. Home Depot is the most cyclical with its business tied directy to the housing market. As a discount retailer Wal-Mart is the least cyclical of this bunch. Although it loses business during a recession it also gains customers who have previously shopped at pricier venues.
DJIA Consumer Non-Cyclicals
The consumer cyclicals ae dependent on a strong economy because consumers use discretionary income to purchase their power saws, Wrangler jeans, Big Macs and Disneyland tickets. If people have less money to spend they can do without these things. But can they do without drugs or how about Deoderant or Soda or Cigarettes? No… these are things that people have to buy whether they like it or not which is why these companies are called consumer non-cyclicals.
Needs vs Wants in the Cyclicals
Our spending habits are what drives the cyclicals and non-cyclicals in the Dow Jones. We cannot do without our Coca-Cola or cigarettes as they both have an addictive hold on some. Coca-Cola even does well in times of a recession and cigarettes would still be able to be found even in the event of a nuclear holocaust. Personal hygiene products just go without saying. When you are next out buying your consumables, I wonder whether you will cast your mind back to this article and perhaps put the company you are purchasing from on your watchlist. Interesting thought.
The Bullhunters Guide to the US Stock Market continues to have 100’s of downloads every week so get your copy now and have it altogether for your own personal reading.
Angela Recchia
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