Look for cheap stocks in cyclicals

In perennial sectors, it may be better to focus on the best business, even if that stock is more expensive

Let’s use an analogy to illustrate the behavioural quirks of stock-picking.  Say, you need a new cell phone. There are certain features which are must-have, and other features that you consider useful or attractive. After you’ve narrowed down choices, price is a determining factor: given two gadgets with similar performance, you’ll pick the cheaper.

When it comes to picking a stock, there are some similarities and a couple of key differences in selection process. You’ll certainly look for stocks, with essential features such as good growth rates, sustainability, honest management, etc. You may widen your search rather than narrowing it because