In What Industries Can You Find Value Stocks?

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In What Industries Can You Find Value Stocks?

You probably have already guessed that value stocks can exist in any industry. Yet they are sometimes easier to spot in cyclical industries, which tend to rise and fall quickly in response to changes in the economy as a whole. To name a few, cyclical industries include automotive, steel, chemical, housing, machinery, financial services, paper, wood products, and other raw materials. Since companies in these industries can experience steep and frequent downturns, their stocks have a greater likelihood of being undervalued.

Things To Know

  • Cyclical industries tend to rise and fall quickly in response to changes in the economy as a whole.

An example from recent history

In the late 1990s, for example, some investors in value stocks purchased stocks in auto financing, real estate investment trusts, and financial service companies that made loans to people with shaky credit ratings. The value investors did well with these stocks, which many other investors were avoiding at the time.

Industries that don’t usually have value stocks

In contrast, stocks of companies in non-cyclical industries are less affected by changes in the economy. They are also less likely to become undervalued. Non-cyclical industries include foods, insurance, pharmaceuticals, and other health-related industries. While you still can find value stocks in these industries, you probably will have to look harder for them.