From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Cyclical stocks are all the craze.

If you’re doing well this year, it’s because you own these stocks. If you’re not, it’s because you don’t own these stocks.

Whether we’re talking about energy, agricultural inputs, or industrial metals, these are the kinds of industry groups that are showing relative strength.

And, to be clear, this is nothing new. This theme has been in place for over a year now.

The only new development is that we’re seeing upside momentum in these names pick up. As a result, the gap between these winners and the rest of the market has widened to historic levels.

The reason why many of these groups are working is simple. They make their money by selling various commodities, and the prices of those commodities continue to rise at an extraordinary pace.

As such, these “value stocks” are now growing their earnings and revenue at levels that make SAAS companies wish they were in the commodity business.

For much of my career, I’ve listened to investors clamor over the incredible 30-40% growth rates that FANG names and other tech stocks have enjoyed for so long.

This kind of growth trajectory was enviable for much of the last decade because not many stocks could beat it. Today, we’re in a very different environment.

With a new bull market in commodities, Materials and Energy stocks are putting their operating leverage to work and reporting triple-digit top and bottom-line growth rates.

In some cases, we’re talking about earnings increasing by 5 or even 10x.

As long as commodities keep working, these figures are going to keep growing and these stocks are likely to remain in favor. We don’t see this trend ending anytime soon, so we want to keep piling into these cyclical names.

Let’s take a look at two of today’s biggest “growth industries,” copper and steel. [Read more…]