August 19th, 2006 | 
Author: “In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.” -Peter Lynch
Stocks are influenced by several different factors. One of the most important factors for many companies is the time of year. The season will often influence how well a particular company does based on the product or service it sells.
In addition, business performance can change as it enters a new part of the yearly business cycle.
Seasonal Stocks
Seasonal stocks refer to companies which offer products and / or services which are in high demand in one season but not in the other season. As their level of demand changes, their value and therefore their stock price increases or decreases.
For example, a company that produces mittens may do really well in the cold winter months but is completely dead in the middle of summer. This means that the majority of its profits come from the winter season.
Investing in seasonal stocks can be tricky because it is hard to determine their real rate of growth and what would be your rate of return on an investment in a seasonal company. To know if the company is growing you would have to compare this year’s profits with last year’s profits in the same season.
Non Seasonal Stocks
Companies which have non seasonal stocks are businesses which are not affected by the changing of the weather. They sell goods and profit, evenly, all year through. This type of stock exhibits an inelastic curve demand. A good example of a non seasonal product is shampoo. The purchase of shampoo is not influenced by the weather holidays or climate.
Cyclical Stocks
This type of stock belongs to a company whose activities are intimately linked with the economy’s natural cycles. These stocks reflect how well the economy is doing which is really a reflection of how consumers feel about the state of their national economy.
Luxury cars are a great example of cyclical stocks. If the economy is doing well and consumers are happy, there will be an increase in the number of luxury cars sold. If the economy is slowing down then there will be a decrease in the number of luxury cars sold because people want to hang on to their money.
Non Cyclical Stocks
Obviously this type of company exhibits features which are not influenced by the movement of the business cycles. Corporations which provide food, medicine and health care are examples of companies which are not affected by a declining or rising economy.
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