Oil stocks take a nosedive

There is a reason why companies that are involved in the production of commodities (think metals, crude oil etc.) are classified as "cyclical" companies. Since these companies have revenues that are largely dependent on the prices of the primary commodities that they produce (which in turn undergo cyclical changes that are largely in sync with the general economic cycle), and high fixed costs which enhance both operational and financial synergies, their profits are very cyclical. But these businesses are inherently riskier than those operating in sectors that exhibit secular growth. So, what explains the willingness of investors to shoulder additional risk? The short answer: the lure of extraordinary profits during the upmarket cycles. In effect, these additional profits are powerful incentives as they are