Basically, cyclical stocks work on a cycle. Sometimes that’s an industry cycle, and other times it’s an economic cycle. But generally, the latter has to be true before the former is true.
And that’s where we are now. A new stimulus package is going to be passed, and it will be big. Also, the new administration is reviving talk about an infrastructure package, which would also be big.
Both of these bills would help companies and their workers navigate through the rough waters we’re in now, to clear sailing down the road. And there is little in-fighting about the spending.
What’s more, vaccine production and distribution is ramping up in the U.S., which is more fuel for the economy as the threat of new lockdowns diminishes.
All this means we can expect consumers to have more money in their pockets. And more money means more spending.
Below are seven cyclical stocks for brighter days ahead. All have strong fundament and technical ratings, so they’re good ideas for now and the future. And what’s more, they all have “A” ratings in Portfolio Grader. Let’s take a look:
- Turtle Beach (NASDAQ:HEAR)
- Big 5 Sporting Goods (NASDAQ:BGFV)
- Vista Outdoor (NASDAQ:VSTO)
- Escalade (NASDAQ:ESCA)
- Lazydays Holdings (NASDAQ:LAZY)
- TakeTwo Interactive Software (NASDAQ:TTWO)
- Charles & Colvard Ltd (NASDAQ:CTHR)
Cyclical Stocks: Turtle Beach (HEAR)
One sector that has gotten hot in the year of the pandemic is gaming. And that makes sense since it’s one of the few things you can do in the comfort of your own home. You can play with friends and family, and you can even play over the internet.
But one piece of equipment that many people forget about is the sound, whether it’s a sound card or headsets.
HEAR has been building audio hardware since it began in 1975, building and repairing synthesizers for professional musicians. The company has been a pioneer in digital music and sound ever since.
In the early 2000s, it saw the potential of computer gaming and stepped into this sector with zeal and innovation. Today, its headsets, keyboards, peripherals and mice are industry-leading products.
It’s still a small company, with a $512 million market capitalization, even after a 368% run-up in the stock in the past 52 weeks. But even after that run, its current price-to-earnings (P/E) ratio is just 13.
Big 5 Sporting Goods (BGFV)
Next on our list of cyclical stocks is BGFV. While Big 5 Sporting Goods has changed hands a few times since its beginnings in California in 1955, today it’s run by the son of the founder. It got its name from its original five stores.
Today, BGFV has 420 stores in 11 states in the West and Southwest. It’s a formidable sporting goods retailer, but it may not ring any bells back East. It did $1 billion in sales in 2020, and its stores range between 8,000 and 15,000 square feet, with an average size of 11,000 square feet.
That puts it in competition with other big-box sporting goods and lifestyle retailers, offering clothing, gear and equipment for a variety of sports and pastimes. Its ability to discount prices helps this cyclical stock take advantage of every part of the recovery.
The stock is up 342% in the past 12 months, yet still has a single-digit P/E. It also has a 2.6% dividend.
Vista Outdoor (VSTO)
One place people could go during the pandemic was outdoors. And that’s where Vista Outdoor comes in.
It may not be a brand name you know, but it sells its outdoor and shooting products under about three dozen different brands, including Bell, CamelBak, Bushnell, Giro, Gold Tip, Remington, Federal, GunMate and others.
The huge rush to the outdoors has meant a lot of sales in the past year, and the stock has responded. At this point is has a $2 billion market cap, so its size and targeted brands help keep its growth on track and its customer base reliable.
VSTO is up 277% in the past year and still has a sub-40 P/E. A lot of its products are purchased on a regular basis, so it’s a smart cyclical stock as the recovery begins and more people start getting back to camping and hunting with friends and family.
Some people prefer to bring the outdoors in. By that, I mean they have spent the pandemic looking for activities that they can access from the comforts of their home, but don’t have to log on to enjoy.
That’s where Escalade comes in. It owns a number of brands that build table-tennis tables (STIGA), pool tables (Mizerak, Cue & Case), game tables (Atomic, American Legend), dart boards (Unicorn, Winmau) and all the accessories and equipment. And for those who want to venture into the backyard, ESCA also sells trampolines, outdoor games (Zume, Pickleball) and basketball hoops (Goalrilla, Hoopstar). It also owns a number of archery brands for target-shooting and hunting.
What’s more, all the brands mentioned are only examples of the brands ESCA owns in these categories.
The company has been around since 1922, so it’s not a private equity, fast-buck kind of group. The stock is up 155% in the past 52 weeks, offers a 2.5% dividend and is still trading at a P/E of 13.
Lazydays Holdings (LAZY)
One sector that caught everyone by surprise was the revival of the recreational vehicle (RV). This was a significant sector in the 1970s before the oil crisis hit and regained some of it luster afterward.
But the pandemic was the perfect situation to revive this activity on a much broader level. People wanted to get out, and RVing meant they could take their “home” with them on the road.
But that’s only where this trend starts. Recent college graduates trying to find work with time on their hands have taken to the road rather than sit in their parents’ basement. Older workers can now work from the road. And retirees have bought in and can now travel to see family with the freedom from a permanent domicile. This is a top cyclical stock.
LAZY isn’t an RV maker. It’s an RV dealer. It doesn’t make the shovel, it sells all the shovels. That means there’s a bit of diversification in its product selection of new and used RVs.
The stock is up 465% in the past year, yet it trades at a P/E of 26. Its market cap is only around $225 million, so don’t chase it too far.
Take-Two Interactive Software (TTWO)
Returning to the indoor world of gaming, this company made a name for itself with the release of Grand Theft Auto. Since then, it’s added the blockbuster hit Red Dead and an e-sports label called NBA 2k League, as well as NBA 2k.
With significant cash flow coming in from those foundational titles, it has expanded its line significantly. But unlike some of the other players in the sector, it’s run by people who come from broadcast television, so it focuses on stories and characters as well as action and visuals.
Three years ago, the company landed in the S&P 500, and it has continued its growth since then. Online gaming and e-sports are only gaining in popularity around the world. As the global economy recovers, this cyclical stock should see big returns.
TTWO is up 72% in the past 52 weeks but has a storied future ahead. It’s a great pick when it comes to cyclical stocks.
Charles & Colvard Ltd (CTHR)
This stock is unique on this list of cyclical stocks because it has nothing to do with gaming, the great outdoors or hobbies. It’s about something else entirely: jewelry.
Coming off of Valentine’s Day, it’s always easier to show those we love how special they are with something enduring, like diamonds. CTHR invented the lab-grown diamond. As the company says, made, not mined.
In today’s climate of environmental and social focus, a grown diamond has several ethical advantages. It isn’t derived from exploiting workers or taken with violence (as blood diamonds are). It also isn’t mined.
Moissanite (lab-grown) diamonds are usually so pure that they have to add an imperfection to tell them from mined diamonds. They are made essentially the same way, but instead of making them in geological time, we can make them with modern technology in human time. What’s more, they cost much less than mined diamonds since none of the other mining and transport costs are factored in.
The stock is small, with only a $69 million market cap, and it’s up 148% in the past year. Don’t chase it, just buy in slowly over time.
On the date of publication, Louis Navellier has a position in HEAR, BGFV, and VSTO in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.