Definition of group rotation

tendency of stocks in one industry to outperform and then underperform other industries. This may be due to the economic cycle or what industry is popular or unpopular with investors at any particular time. For example, cyclical stocks in the auto, paper, or steel industry may be group leaders when the economy is showing robust growth, while stocks of stable-demand firms such as drug or food companies may be market leaders in a recession. Alternatively, investor demand for stocks in certain industries, such as biotechnology, computer software, or real estate investment trusts may rise and fall because of enthusiasm or disappointment with the group, creating rotation into or out of such stocks. Market analysts watch which industry group is coming into and going out of vogue in recommending stocks that might lead or lag in coming months. Also called sector rotation.