How do you invest in “”cyclical”” stocks?

Have you ever invested in cyclical stocks, and what's your experience with them? I've been exploring this subject, mainly because of the “”roller-coaster”” nature of these stocks, and I'm trying to be as smart as possible about timing my investments well. Cyclical stocks rise and fall more dramatically compared to the overall market, so spotting them, knowing when to act on them, and not risking more than you have to is what I'm interested in.

Generally speaking, cyclical stocks belong to industries that are sensitive to the business cycle and economic conditions. Basically, people tend to buy things like fancier cars or luxury brands only when they have spare money. Economic recessions mean fewer customers (but not always!), and during economic booms, these stocks do well (also some notable exceptions!).

Of course, everyone wants to buy low and sell high, but with cyclical stocks, it's just as unpredictable as with any other. Economic indicators like employment rates or consumer spending are good metrics to keep an eye on, and when these go down, you'd stop investing in some of these stocks. But which ones do you buy beforehand?

Also, does risk mitigation work just as with any other type of investment? I mean, do you diversify a portfolio by mixing in some non-cyclical or “”defensive”” stocks like utility companies or healthcare, which are less affected by economic downturns?

Another issue with us thinking we can predict these cycles is how interconnected the world is nowadays (mostly a good thing, of course) and the way information is presented and perceived by consumers. I'm talking about things like social media scandals (or hype trains) and all kinds of marketing campaigns, where the hype could drive up stock prices temporarily, even for an industry that's not doing well. I suggest reading about White Hat Backlink Services and how these work nowadays, btw.

These things create a “”buzz,”” and people are more likely to invest, even though good marketing doesn't fix a bad economy. If economic indicators are poor, no amount of clever advertising will sustain the stock price for long.

So, investing in cyclical stocks requires timing and analyzing economic indicators, but what more should we really know? What am I missing, and what are the strategies you'd use?