Last week, I (Tom Yeung) introduced you to two cyclical stocks to buy immediately.
These promising firms couldn’t have been more different, at least from a business perspective:
- Digital Realty Trust Inc. (DLR) is a $50 billion data center company leasing millions of square feet to AI cloud computing customers.
- Tyson Foods Inc. (TSN) packs chicken and beef into grocery store containers.
Yet, these two companies are both riding cyclical waves. The AI Boom is driving Digital Realty’s business to new heights, while a turnaround in cattle production is powering Tyson to a strong recovery.
That pair joins another eight recommendations from January that also focused on riding cyclical trends. These 10 high-quality firms have now risen 7% on average – outperforming the weighted S&P 500 return (-3%) and trouncing the -6% decline in the Nasdaq Composite over the same period.
That’s because cyclical effects can often overwhelm broader market negativity. Commodity prices surged during the 2008 financial crisis while everything else was plummeting… airline stocks boomed in the mid-2010s as oil prices collapsed… and chipmaking stocks surged in 2020 on a global shortage despite the broader Covid-19 selloff.
Today, the cycle is pointing upward for power-producing companies… financial exchanges… meatpackers… and more. That’s happening even as the rest of the market goes in reverse.
Nevertheless, these wonderful up-cycles are incredibly short to Keith Kaplan, CEO of TradeSmith. He’s helping his software firm’s investor customers find cycles across decades… if not longer.
That’s why I encourage you to watch Keith’s latest presentation while it’s still available. During this free broadcast, he reveals what he calls “the pattern,” a cyclical effect that’s only happened every 49.5 years on average.
When this patten appears, Keith says, it can send a specific class of stocks soaring. In fact, back-tests show the last time this pattern appeared under these conditions, it led to historic gains over the long haul, such as 9,731% from a leading software company… and 28,894% from a computer-driven hardware firm.
For long-term investors, it’s an event you don’t want to miss.
Click here to watch that presentation.
And in the meantime, I’d like to introduce two final cyclical stocks to buy this year.
Let’s Talk About the Weather
In 2015, New England faced “Snowmageddon,” an epic winter season that dumped nearly 8 feet of snow in Boston alone. The city would spend over $40 million responding to the storms – more than twice its annual snow-removal budget. One massive snow pile in South Boston’s Seaport district took until mid-July to fully melt.
Construction of Boston’s city monument to Winter ’15
The following period would prove a windfall for Douglas Dynamics Inc. (PLOW), America’s largest producer of snowplow attachments and ice management tools. Over the next three years, revenues would surge 56% as customers scrambled to replace their aging plows and salt-spreading equipment.
PLOW’s stock more than doubled.
A down-cycle then began in 2020 after a series of dry winters eviscerated demand. Northern regions from the Midwest to New England saw unusually low amounts of snow, and Douglas’s stock dropped to within striking distance of its pre-2015 levels.
2025 could mark a turnaround year for the Wisconsin-based firm.
In January, an unusual Gulf Coast snowstorm dumped as much as 10 inches of snow on parts of New Orleans. The city only had 14 rented plows to clear the streets. The same storm would also expose enormous snow-clearing equipment shortages from Texas to the Carolinas.
Many parts of America are also seeing their first “average” winters in several years. That same month, Boston saw 4 inches or more of snow for the first time in 1,000 days.
That should provide a new up-cycle for this high-quality firm. Douglas Dynamics owns some of the best-known brands in the business, including Fisher, Henderson, and SnowEx, and has a history of making solid bolt-on acquisitions. The company has generated positive cash flows every year since it began publishing records in 2006.
In addition, shares trade at a significant discount. PLOW is currently valued at under 10 times earnings and eight times cash flow – less than half of historical levels.
Please note that much of the Midwest is still seeing an unusually dry winter, so Douglas’s up-cycle could take until 2026 to fully play out. But given the Northeast’s sudden return to an “average” winter (and the South’s recent snowstorm), that should be enough to jumpstart a new upward cycle for PLOW’s beaten-down shares.
The Tools of the Trade
In January, I said CME Group Inc. (CME) and Cboe Global Markets Inc. (CBOE) were two wide-moat cyclical companies to buy. These firms have virtual monopolies in the options and futures markets, and profits tend to spike when volatility rises.
Donald Trump’s second term in office is providing a compelling catalyst for gains.
Shares of the two companies have since risen 7% each on a spike in the market’s VIX “fear” index (a ticker ironically owned by CBOE). Further gains are likely as the threat of tariffs materialize.
This week, I’d like to add one more financial firm to our list of high-quality cyclical stocks:
Charles Schwab Corp. (SCHW). The world’s largest brokerage firmscores a solid “B” based on InvestorPlace Senior Analyst Louis Navellier’s proprietary Stock Grader scores, and has generated positive net income every year since going public in 1987.
Schwab’s management has also been relatively quick to recognize trends in both institutional and retail trading. In 2019, the firm shocked the industry by offering zero-commission online trades, reasoning it could earn enough interest income from cash deposits to make up the difference. The following year, Schwab acquired TD Ameritrade, giving it a strong presence in the online trading boom.
Together, that’s turned Schwab into a money-printing machine. The firm now supports over $8 trillion of client assets and generates $9 billion of net interest revenue annually – almost half of total revenues.
Still, the trading business is highly cyclical. Trump’s first year in office in2017 saw a flurry of stock trading, boosting Schwab’s revenues by 17% and its share price by 35%. Rising interest rates the following year then created a down-cycle by causing customers to reduce cash balances and cutting into Schwab’s interest revenues.
A similar cycle played out in the years following the Covid-19 pandemic. Retail traders flush with pandemic stimulus money powered Schwab’s business to record heights. Then, rising rates from 2022 through 2023 created a down-cycle for the blue-chip firm. Wall Street’s rollercoaster rides are even wilder for trading firms.
2025 marks the beginning of a new cycle. Donald Trump is back in office, and according to Nasdaq data, trading in equity volumes surged 14% in January. Interest rates are also on the decline, making cash more attractive.
Both should benefit Schwab greatly. Analysts now expect earnings per share to surge 34% this year and 26% in 2026. For conservative investors seeking a safer way to play the market, Schwab offers an incredible deal.
The 49.5-Year Cycle
I must emphasize that the 12 cyclical stocks I’ve shown you so far this year all have relatively short time horizons. Douglas Dynamics could reach its peak within two years. Kimberly-Clark Corp. (KMB), a cyclical firm I recommended in January, took just a month to come within 5% of its target price.
That’s why I urge you to check out Keith’s free special briefing while it’s still available.
During that event, he’ll demo his company’s new tech breakthrough that revealed “the pattern.”
He’ll show you the pattern in full.
Keith will even reveal the names and tickers for 10 tech stocks poised to soar as the pattern begins to play out in 2025.
Based on what happened last time, the long-term gains could get legendary.
Just go here to watch Keith’s free broadcast.
I’ll see you back here next week,
Regards,
Thomas Yeung
Markets Analyst, InvestorPlace
