Different industry have different length of business cycle.
I can still remember one acquaintance of mine observe closely that the shipping up cycle usually takes place 4 years and down cycle 2 years.
He may not be wrong, but in recent times, the shipping supply was so out of wack that the downturn lasted longer than normal. The global slowdown and challenging economic situation does not help as well.
If the stock that you buy, depends very much on getting the cycle correct, then it is a tough endeavor.
In such a scenario, it is better to have good sensing what is a normal cycle. The above annual order graph is not new to me. I saw one from an old report shortly after Keppel and Sembcorp fell.
What shocked me was that I didn’t know the cyclical nature could be this long.
My sensing then was, better be safe than sorry. Be a keen observer rather than buy and observe.
Macquarie notes that there are still rigs under-construction. They also convey that unlike the situation in 2009, the overall fleet in existence (and underutilized) is very young.
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