Cyclical businesses sometimes get a bad rap for their inherent volatility.
But if you buy ASX shares in growing businesses that are in cyclical industries, you can still make a reliable long-term investment.
Much like the general stock market, they will be volatile in the shorter term but head upwards in the long run because of their growth.
Experts this week explicitly named two such stocks as buys.
Image source: Getty Images
Upside from tight labour market
Seneca investment advisor Arthur Garipoli is recommending online jobs classifieds site SEEK Limited (ASX: SEK).
"This employment and education company reported a good fiscal year 2022 result," Garipoli told The Bull.
"Revenue from continuing operations was up 47% on the prior corresponding period, while EBITDA grew 53%."
Unfortunately, the Seek share price has dipped 20% since mid-August.
Garipoli attributed this to the mystery around what the economy might be like once the ongoing interest rate rise is done.
"The market failed to embrace the good result based on an uncertain macroeconomic outlook."
But, he added, patient investors will be fine.
"Seek is a cyclical business. The stock offers potential upside on valuation grounds, as a result of a tight domestic labour market."
Catapult Wealth portfolio manager Tim Haselum last week also mentioned the "tight labour markets" in recommending Seek as a buy.
"The company is investing in its IT systems. Revenue from continuing operations grew by 47% in fiscal year 2022."
Mineral sands and rare earths to boom
Iluka Resources Limited (ASX: ILU) is in a sector that's more traditionally thought of as cyclical.
According to Spotee Connect founder Elio D'Amato, the mineral sands miner dished out a "solid interim report".
"Sales exceeded production, and all at high zircon prices."
The coming pipeline is also pleasing.
"The company is expected to start its rutile mill in Western Australia by mid next year," said D'Amato.
"The Eneabba rare earths refinery will be a new growth engine, following recent approvals and a $1.25 billion non-recourse loan from the Australian government to build it."
Iluka Resources shares have not taken off like some other resources equities in 2022. The stock is down 11% for the year, after suffering a 15.2% drop over the past fortnight.
That hasn't stopped Goldman Sachs in agreeing with D'Amato that it's a buy right now.
"We are positive on Iluka's project pipeline and forecast >40% production growth in mineral sands volumes," its notes read.
"We think Iluka's Eneabba rare earths refinery is a strategic asset considering it will be only the third western world rare earths refinery."
