Cyclical vs defensive
Definition · Level 9 · Valuation
Keep reading with Tradecraft
Without an account, you can read three definitions every 30 days. Tradecraft explains all 738 terms and strategies, with the lessons that teach them, flashcards that come back before you forget, quizzes and a payoff lab.
Sectors whose earnings swing with the economy (autos, airlines, semis, materials) versus those with steady demand through recessions (staples, utilities, healthcare).
Example
“Recession fears — rotating out of industrials into staples.”
Where Tradecraft teaches it
Level 9 · Valuation, in the lesson “Investing styles and sell-side vocabulary”: Growth vs value, quality, moats, cyclicals vs defensives, ratings, targets and re-ratings.
Related terms
- Growth vs valueInvesting styles: paying high multiples for fast growers whose worth lies in far-future cash flows, versus buying low-P/E, low-P/B or high-yield…
- InitiationAn analyst’s (or bank’s) first published rating and target on a stock, typically with a long in-depth report.
- MoatA durable competitive advantage — brand, network effects, switching costs, scale or patents — that keeps returns on capital high for years despite…
- Multiple expansion / compressionThe market paying more or less per dollar of earnings (P/E up or down), independent of earnings growth; also called a re-rating or de-rating.
- Overweight / outperformBuy-equivalent sell-side ratings: the analyst expects the stock to beat its sector or the market.
- Price targetAn analyst’s estimate of where the stock should trade, usually over 12 months, published with the rating and backed by a multiple or a DCF.