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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Are these the best cyclical shares to watch in March 2024?

What are the best cyclical shares to watch in March 2024? These have been selected for recent market news

Are these the best cyclical shares to watch in March 2024? Source: Bloomberg

Some company fortunes – and therefore their shares – rise and fall depending on the state of the economy. This is because demand for their goods is often discretionary and dependant on the money in consumer’s pockets or government buying cycles. These types of companies are described as ‘cyclical’ because their turnover and profit growth tends to follow the economic cycle.

Sectors which are cyclical include financials, luxury goods manufacturers, travel and automobile companies, and advertising.

The opposite of ‘cyclical’ stocks is defensive stocks, which are always in demand, such as those in the tobacco and healthcare sectors.

Here are what we think may be some of the five best cyclical stocks to watch. These have been selected for recent market news.

Always do your own research. Past performance is not a guide to future performance.

Best cyclical shares to watch

1. Burberry

2. Rightmove

3. Barclays

4. On the Beach

5. ITV

Burberry (LON: BRBY)

Shares in Burberry were hit for six last year after the company released a profit warning. The luxury retailer admitted it may miss its sales targets for the full year. Typically, higher end clientele tend to be more insulated from financial crises than other customers. However, the current high interest rate environment is meaning its clients are cutting back on their discretionary spending. Other luxury goods brands, such as LVMH and Gucci, have reported similar issues. Burberry has also been hit by the slow return to normality in its Chinese markets following the Covid lockdowns there.

Shares in the company are down a painful 47% to 1338p. However, once the world economies start to recover, Burberry’s customers should return. The shares, which yield 4.5% and are trading on a price earnings ratio of just 11, could be worth watching. Analysts at broker Barclays have an equal weight recommendation and a price target of 2,230p on the shares.

Rightmove (LON:RMV)

The UK housing market has slowed due to the interest rate hikes last year and economic environment. Yet, strangely enough, Rightmove actually benefited from estate agents struggling, as they took on more premium packages from the company. At the half-year results, revenues rose 10% to £179.5 million (from £162.7 million in 2022), while pre-tax profits increased to £130.3 million (from £121.2 million in 2022).

The shares are down 6% this year to 554p but are worth keeping an eye on as the economy improves and interest rates ease. They are trading well off their five years highs of 803p. Chancellor Jeremy Hunt currently expects inflation to fall in the early summer and the cost of a number of mortgage products is falling already.

Source: Bloomberg

Barclays (LON:BARC)

Banks and financial firms are included among cyclical stocks because their fortunes are also tied to the performance of the economy. While they may benefit from higher interest rates, they can also be negatively affected by customer defaults, the housing market and poor stock market performance.

Barclays’s valuation is struggling to recover from issues in its investment banking arm. The shares trade on a price earnings ratio of just 4 – about half that of its peers. However, the bank has just announced it will return £10 billion to shareholders over the next three years via buybacks and dividends and unveiled a new strategic plan to turn its fortunes around.

Chief executive CS Venkatakrishnan also plans to cut £2 billion of costs by 2026 and hopes a recovery in deal-making will boost revenues. The shares are down 7% this year to 161p but are worth watching.

On the Beach (LON:OTB)

Travel companies like On the Beach tend to be reliant on the vagaries of the economy and consumer spending to outperform. However, despite the cost of living crisis, a number of hoteliers, including On the Beach are performing well due to their continued bounce-back from Covid.

What’s more, it’s thought that some consumers are deciding that their summer holiday is sacrosanct, whatever the state of the economy, and are prepared to cut back elsewhere to ensure that it goes ahead.
The holiday provider is seeing strong growth in bookings, despite the recession. The company said at its recent AGM update that it had a record forward order book, with the total transaction value (TTV) of holidays sold up 27% up on the same period last year.

Meanwhile, chief executive Shaun Morton says that the company’s TTV for summer 2024 will be “significantly ahead of summer ‘23.” The shares trade on a price earnings ratio of 22 but are worth watching.

Source: Bloomberg

ITV (LON:ITV)

ITV produces content for not just its own TV channels but also other companies, including the BBC, Amazon Prime and other US TV firms including Peacock. It also recently launched its own streaming service, ITVX, which it says is performing well.

The shares are cyclical because the company makes part of its revenues from advertising sales. Although the terrestrial television sector has been hit by the popularity of streaming services, ITV says revenues from its ITV Studios arm and its Media and Entertainment business are “more than offsetting” the decline in linear advertising sales.

The advertising market is struggling at the moment but should return to health as the economy improves. The shares are down by a third this year to 57.74p but are worth keeping an eye on. Analysts at broker Deutsche Bank currently have a buy rating on them.

How to invest or trade in cyclical shares with us

1. Learn more about cyclical shares
2. Open an account with us or practise on a demo
3. Select your opportunity
4. Choose your position size and manage your risk
5. Place your deal and monitor your trade

You can either invest in shares directly or trade using spread betting or CFDs to benefit from leverage.

Keep in mind, leverage means you can gain or lose money faster than expected. Because your position size is far greater than your deposit, you could lose more money than you put in. Be aware also that past performance is not an indicator of future returns.

Learn more about the differences between trading and investing here.

Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.
*Based on revenue excluding FX (published financial statements, October 2021).


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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