A cyclical stock is one whose profits are highly correlated with the business cycle. When the economy is in expansion, a cyclical stock generates increased profits. Conversely, when the economy slows the prospects for a cyclical stock diminish. A cyclical stock may be found in sectors such as automobile, travel, or manufacturing. The common thread is discretionary purchases that may be postponed during difficult economic times. For investors with longer time frames, purchasing a cyclical stock during an economic downturn is a classic contrarian strategy.