Peter Lynch:
*"You make your best money in a cyclical when earnings go from rotten to mediocre or from mediocre to pretty good. The danger point is when earnings go from great to spectacular. Somewhere between these points wall street will figure out it will go down"*
Normally you search for a good company, calculate how much it's worth and pay at low valuations. In other words when PE/PS/PB or intrinsic value are low. For cyclicals you do the opposite. Buying when earnings are rotten and valuations are high. But if earnings are rotten or mediocre, this could also be any trash company (Value trap). What's the difference between a trash company and a cyclical at its lows?
When buying cyclicals: The big question is at what exact valuation is a good entry point? When PB reaches 20? When PS is at historic lows/highs?
We don't want to buy and wait 4 years to see results or lose completely.