If a company is out of favor with its shareholders, has serious management problems or is losing ground to competitors, its value can collapse quickly even if the rest of the market is highly valued. That's what happened here. However, strong companies can cope with dramatic loss of value and can rebound if internal changes and external conditions create the right environment and investors respond with renewed interest. All stocks don't act alike. One difference is how closely a company's business is tied to the condition of the economy.
Cyclical stocks are shares of companies that are highly dependent on the state of the economy.
When things slow down, their earnings typically fall, and so does the stock price. But when the economy recovers, earnings rise and the stock price goes up. In contrast, stock prices for companies that provide necessary services and staples, such as food, tend to stay fairly stable. The trick to making money, of course, is to buy a stock before others want it and sell before they decide to unload. The overall economic environment in which a company operates Stocks that pay dividends regularly are known as income stocks , while those that pay little or no dividend while reinvesting their profit are known as growth stocks .