ARB to BRG: How have these 7 ASX cyclical stocks performed YTD?

Highlights

• Cyclical stocks generally are highly volatile and are likely to deliver higher returns.

• The performance of cyclical stocks is correlated to the economy.

• Those investing in cyclical stocks should be well aware about the ongoing economic trends and scenarios.

Cyclical stocks are known to follow economic cycles of expansion, contraction, recession, peak and recovery. The underlying business of such firms follows these stages of the economy – i.e. they grow during the expansion and slowdown phases of a recession. These economic cycles have direct and indirect impacts on the sales and profits of these companies. As must be clear from the above-mentioned definition, such companies make the most during an economic growth cycle and get the worst hit during recessionary phases.

A majority of firms in the cyclical sector sell consumer discretionary items. The demand for these products has been seen to spike as the economy grows. Customers spend less on these items during a recession. Here are a few companies which are prone to economic cyclicity – airlines, hotels, retail, restaurants, automakers, technology, banks, manufacturing, and others.

Meanwhile, cyclical stocks are known to be highly volatile in nature. These give higher returns during bouts of economic growth. So, investing in cyclical stocks needs detailed research and planning. Investors and traders need to closely track stocks that are closely correlated to an economic cycle.

In this article, we at Kalkine Media® will discuss the performance of seven ASX-listed cyclical stocks on a year-to-date (YTD) basis.

(However, one needs to do thorough research before taking any exposure, as sinusoidal market trends are evident)

ARB Corporation Ltd (ASX:ARB)

ARB Corporation is focused on the creation, manufacturing, and distribution of accessories related to motor vehicles. It also deals in light metal engineering activities. 

Shares of ARB Corporation declined about 45% on a year-to-date (YTD) basis (as of closing on 29 August 2022, at 12:10 PM (AEST). The stock has dropped by more than 41% in the past year.

While the dip in the past month was nearly 9%, the share price has slid 27% in the past six months. The company has an annual dividend yield of 2.27%.

Domino’s Pizza Enterprises (ASX:DMP)

Domino’s Pizza Enterprises is engaged in running retail food outlets in Australia. The company has the largest number of network stores across the country.

Domino Pizza Enterprises’ share price fell nearly 46% on a YTD basis. The share price has slipped more than 56% in the past year. The stock has witnessed a fall of 9% in the past month. Shares of the company have dropped more than 16% in the past six months. The company has an annual dividend yield of 2.36%.

Corporate Travel Management Ltd (ASX:CTD) 

Corporate Travel Management provides cost-effective travel management solutions to corporate management.

Corporate Travel Management’s share price fell nearly 20% on a YTD basis. The shares have slipped over 19% in the past year. While the shares have declined about 16% in the past six months, the past month’s fall stands at nearly 3%. Corporate Travel Management has an annual dividend yield of 0.26%.

Lovisa Holdings Ltd (ASX:LOV)

Lovisa Holdings operates in the field of fashion jewellery retailing. Lovisa operates in countries such as Australia, New Zealand, Malaysia, and Spain among others.

Lovisa Holdings’ share price fell nearly 4% on a YTD basis. The share price has seen a slip of more than 1% in the past 12 months. While the past month’s gain was over 8%, the stock price has declined about 4% in the past six months. Lovisa Holdings’ annual dividend yield stands at 2.94%.

Source: ©Miflippo  | Megapixl.com

Orora Ltd (ASX:ORA)

Orora is engaged in innovative packaging solutions.

Orora’s share price fell over 4% on a YTD basis. While the stock has risen more than 6% in the past month, the shares have declined about 11% in the past six months. The share price has dipped 0.3% in the past 12 months. Orora’s annual dividend yield stands at 4.74%.

Tabcorp Holdings Ltd (ASX:TAH)

Tabcorp Holdings is focused on gambling and entertainment services. The company operates in segments such as Wagering and Media, Keno, and Gaming Services.  

On a YTD basis, Tabcorp Holdings’ shares declined by more than 1%. The stock has risen by more than 7% in the past year. While the stock has fallen 0.3% in the past month, the share has risen about 4% in the past six months. The company enjoys an annual dividend yield of 7.57%.

Breville Group Ltd (ASX:BRG)

Consumer products firm Breville Group provides small electrical appliances. It operates in North America, Australia, New Zealand, and the remaining parts of the world.

Breville Group’s share price fell over 32% on a YTD basis. The share price has seen a rise of 31% in the past 12 months. The stock witnessed a past month’s decline of 5%. In the past six months, the shares have fallen 18%. Breville has an annual dividend yield of 1.33%.

Difference between cyclical and non-cyclical stocks

As already explained, the performance of cyclical stocks is correlated to the economy unlike non-cyclical stocks or defensive stocks, which include those goods and services which are purchased during all kinds of business cycles. Companies dealing in food, water and gas are part of the non-cyclical sector. These firms continue to remain in demand even during recessionary phases of the economy. In short, non-cyclical stocks are known to beat the market irrespective of the economic scenario. Examples of non-cyclical stocks include non-discretionary retailers, utility stocks and the real estate sector.

There are investors who added non-cyclical stocks to their investment portfolio in order to hedge against losses due to cyclical stocks amid economic weakness.

Thus, investors should look at combining cyclical and defensive stocks if they want to reap rich dividends in the long term.

Bottom Line

According to experts, investors who seek to invest in cyclical stocks should be well aware of ongoing economic trends and scenarios. They should also have a fair enough idea about the expected investment returns and ways to maximise profits in these investments. In addition, investors should also consider risk factors involved in investments so that they don’t get financially impacted by fluctuations in the stock market.