Investing 101: Stock Market Sectors

Before you start investing in global markets, it is important to understand the various stock market sectors. A stock market sector is a group of stocks usually in the same industry that have a lot in common. The Global Industry Classification Standard (GICS) has divided the stock market into 11 different stock market sectors.

These sectors include:

•Communication Services
•Consumer Discretionary
•Consumer staples
•Energy
•Financial
•Healthcare
•Industrial
•Materials
•Real Estate
•Technology
•Utilities

Categorizing stocks into sectors makes it easy to compare companies that have similar business models. When investing, an investor can choose from stocks within the sectors that they understand and that interest them. Furthermore, investors can compare which stocks within each sector are making the most money thus helping you make decisions about what your next investments will be.

Here is more explanation of each of the sectors and some of the stocks listed under each sector.

Communication Services

This sector includes telecommunication service providers as well as media and entertainment companies ranging from TV and radio companies to new forms of communication like social media giants and video on demand providers.

Some of the biggest stocks in the communications services sector are Facebook/Meta (FB), Alphabet (GOOGL, GOOG), T-Mobile (TMUS), Netflix (NFLX) and many more. Yahoo Finance has about 169 companies listed under this sector, check them all out here.

Consumer Discretionary

The consumer discretionary sectors covers goods and services whose demand greatly depends on the consumers financial status. The sector therefore includes different industries like brick and mortar retailers, automakers, hotel and restaurant companies.

Amazon (AMZN), Tesla, Inc (TSLA), The Home Depot (HD), Toyota Motor Corporation (TM), Alibaba Group Holdings(BABA), NIKE, Inc (NKE) and McDonalds (MCD) are among the largest companies listed in this sector.

Consumer Staples

The consumer staples or the consumer defensive sector covers goods and services needed by consumers regardless of their financial condition. The sector therefore covers food, beverage, tobacco, and household and personal products companies. Supermarkets dealing with staples items also fall into this sector.

Some of the most valuable stocks in this sector are Walmart Int (WMT), The Proctor & Gamble Company (PG), The Coca-Cola Company (KO), Costco Wholesale Corporation (COST), PepsiCo (PEP).

Energy

The energy sector covers companies in the oil and gas industries ranging from oil and gas exploration and production companies to producers of other consumable fuels like coal and ethanol. Many renewable energy companies are however not listed under the energy sector yet but are listed in the utilities sector.

The largest stocks in this sector are Exxon Mobil (XOM), Chevron Corporation (CVX), Shell Plc (SHEL), PetroChina (PTR) and Total Energies (TTE);

Financial

The financial services sector covers business related to finance ranging from banking institutions to mortgage finance specialists, insurance houses, brokerage companies as well as consumer finance providers.

Some of the popular stocks listed in this sector are Berkshire Hathaway (BRK-A & BRK-B), JPMorgan Chase (JPM), Visa Inc (V), Bank of America Corporation BAC), Mastercard (MA) and Morgan Stanley (MS).

Healthcare

The healthcare sector covers companies that develop pharmaceuticals (biotechs) and companies that provide healthcare equipment and services like surgical supplies, medical diagnostic tools and health insurance. The healthcare specifically the biotech stocks were some of the best performing stocks in 2021 due to the Covid-19 pandemic and resulting vaccines.

Some of the notable stocks in this sector are United Health Group (UNH), Johnson & Johnson ((JNJ), Pfizer PFE), Abbvie (ABBV), AstraZeneca (AZN), Moderna (MRNA), BioNTech SE (BNTX).

Industrial

The industrial sector covers business that involve use of heavy equipment ranging from most conglomerates to transportation stocks like airlines, railroads and logistics as well as defense, aerospace, machinery, construction and engineering industries.

Here we find stocks like United Parcel Service (UPS), Lockheedd Martin Corporation (LMT), Deere & Company (DE), Caterpillar Inc (CAT), The Boeing Company (BA), General Electric (GEE) among others.

Information Technology

The information technology sector covers companies in different parts of technological innovations and includes hardware, software, semiconductor, communications equipment, and IT services companies.

This sector therefore includes the 2 largest listed companies in the US in the form of Apple (AAPL) and Microsoft (MSFT). Other notable companies making this list include Nvidia (NVDA), Taiwan Semiconductors (TSM), Oracle (ORCL), Adobe (ADDBE), Intel (INTC) and Advanced Micro Devices, Inc (AMD).

Materials

The materials sector covers companies providing goods for use in manufacturing like mining, forest products, construction materials, packaging, and chemicals companies.

Some common stocks under this sector include Barrick Gold Corporation (GOLD), Vale S.A (VALE), The Sherwin-Williams Company among others.

Real Estate

The real estate sector covers companies that develop or manage real estate projects and real estate investment trusts (REITs). REITS are companies that own or finance income producing real estate in a rage of property sectors.

Stocks listed under this sector include Prologis (PLD), American Tower Corporation (AMT) among others.

Utilities

The utilities sector covers a wide variety of utility companies including specialists in natural gas transmission and distribution, electrical power distributors, independent power producers and renewable electricity companies.

Stocks in this sector include NextEra Energy (NEE), Duke Energy (DUK), Consolidated Edison (ED), Eversource Energy (ES), American Electric Power (AEP), National Grid Plc (NGG) among others.

2022 Returns

So far since the start of the year, the Energy sector (+21.96%) has outperformed all the other sectors, mostly driven by rising oil prices caused by the uncertainties of the Russia-Ukraine conflict. The consumer cyclical sector has seen the most drawback (-22.9% year to date)