- Franco-Nevada Corporation (FNV)
- Wheaton Precious Metals Corp. (WPM)
- Stella-Jones Inc. (SJ)
- West Fraser Timber Co. Ltd. (WFG)
By definition, cyclicals are going to be volatile. Often they will not consistently outperform the broader markets but can go on strong runs every so often. They can offer some inflation protection as well. Certainly, they can be frustrating to hold, especially during a cyclical downturn. However, a small allocation to the sector in general can make sense. Despite its cyclicality, most of these companies are inflation-protected and these long-duration assets can be around for decades. We think WFG is a fine name, the company is just in a downturn along with its industry, and it could come back strongly in a more favourable macro environment.
We prefer companies that have strong balance sheets and shareholder-friendly management. Investors can consider getting exposure to the theme by owning capital-light royalty names such as FNV or WPM.