Here's are some key groups.
"Cyclical" companies are defined by how their business reacts to economic change. People spend money more conservatively in
recessions. They put off major purchases, like cars and refrigerators. Thus, manufacturers of large appliances are cyclical.
Meanwhile, companies that aren't so affected are "defensive." An example would be pharmaceutical firms. If you're taking
heart medication, you're not going to stop because of an economic downturn.
"Seasonal" companies experience significantly different levels of business at various times of the year. Department stores,
for example, see sales surge during the Christmas season. Swimming pool companies operate mainly in the summer.
"Blue chip" companies have been around a long time and are known for being solid, relatively safe investments. They're steady
growers and usually pay dividends. Some examples: General Electric, Exxon, Johnson & Johnson. At the other end of the
spectrum are "speculative" stocks, typically tied to young, relatively unknown, and risky companies. Many are promising great
things, but have yet to prove themselves. Examples might include gold mines or companies trying to develop cures for cancer.
"Growth" stocks are growing faster than the market average. They usually don't pay any dividends, as they need their cash to
continue growing. Their stock prices often go up -- and sometimes down -- quickly. Aggressive investors favor growth stocks.
Some examples: Microsoft, America Online, Amazon.com, eBay. (Railroad and telegraph businesses were growth companies once --
but things change over time.)
"Value" stocks are favored by investors looking to buy the proverbial dollar for fifty cents. They seek companies that are
out of favor. If, for example, auto stocks have dropped as investors lose interest in them, these could be value plays.
"Income" stocks may not grow too quickly, but they pay fat dividends. They're sort of like bonds, which pay you interest.
Traditionally, utility companies have paid high dividends. Today some real estate companies do, as well. These are often
favored by those in or near retirement, who rely on the dividends to supplement pensions or savings.
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