Cyclicality and Debt

Cyclicality and Debt

This is such an important part of successful investing. Any mistake in this area and the market will shine daylight into it sooner than later. Companies that carry a lot of debt through acquisitions or otherwise and are hostage to the market cycle require a high level of ability to successfully and consistently navigate on a risk-managed basis.

This is apparent in a sector such as Semiconductors, many of these companies carry little or no debt and understand there is always a pending downturn going to take place at some point. Other sectors such as Specialty Chemicals are much more fragile due to their high debt mix and susceptibility to the next recession.