There are 11 stock market sectors, as defined by the Global Industry Classification Standard (GICS). GICS® serves as a framework for analysing industries, aiding investors in comprehending the principal business operations of global companies. This classification standard , crafted by MSCI and S&P Dow Jones Indices, ensures that investors have access to uniform and comprehensive definitions of industry sectors. Companies with similar business models are grouped together, helping you to classify and compare stocks. It provides a clear hierarchy of industries and sub-industries.
In this article, we will explain the main features of the 11 GICS sectors, which are:
- Energy
- Materials
- Industrials
- Consumer Discretionary
- Consumer Staples
- Health Care
- Financials
- Information Technology
- Communication Services
- Utilities
- Real Estate
Energy
The energy sector includes companies that are involved in the production and distribution of oil, gas, coal and other fuels. The companies fall under two main industry groups: Energy Equipment & Services and Oil, Gas & Consumable Fuels. The first group comprises of companies engaged in exploration, production and those providing equipment and services to the sector. Renewable energy stocks do not currently fall under energy sector. Instead, companies involved in the production of renewable energy, such as electricity through solar, wind and hydro, currently fall within the utilities sector. This could change in the future, as there are ongoing discussions between members of the investment community, S&P Dow Jones Indices and MSCI to reorganise the GICS structure and include renewables in the energy sector.
Examples in this sector: Shell, ExxonMobil and BP
Materials
In the Materials sector, you will find various companies that provide services and resources, such as chemicals, paper, metals and other construction materials, mostly used in manufacturing and other purposes. This sector incorporates both chemical and mining stocks. Chemical stocks involve the production of various chemicals, contributing to sectors like construction and manufacturing. Mining stocks, on the other hand, focus on extracting valuable resources from the earth. Both segments play important roles in the creation of goods essential to daily life.
Examples in this sector: Air Liquide, BHP, Sherwin-Williams and DuPont
Industrials
Within the Industrials Sector are certain industrial stocks of companies that manufacture and distribute capital goods and provide related services. The companies fall under three main industry groups: Capital Goods, Commercial & Professional Services and Transportation. This multifaceted sector also includes companies in defence, construction, engineering, machinery and electrical equipment manufacturing.
Examples in this sector: Boeing, UPS, FedEx, Siemens, Airbus and Delta Air Lines
Consumer Discretionary
This sector contains consumer discretionary stocks, which are companies that provide goods and services that are not essential for daily survival but depend heavily on consumer spending habits and preferences. The four main industry groups are: Automobiles & Components, Consumer Durables & Apparel, Consumer Services and Retailing. Some of the stocks that you will discover in this sector are travel stocks, leisure stocks, hospitality stocks, apparel stocks and automotive stocks.
Examples in this sector: Amazon, Nike, Starbucks, Marriott and Toyota
Consumer Staples
Companies in the consumer staples sector are firms that provide goods and services that are essential for everyday life (no matter the state of the economy), such as food, beverages, personal care and household products. The companies fall under three main industry groups: Food & Staples Retailing, Food, Beverage & Tobacco and Household & Personal Products. Therefore, you’ll find food stocks, beverage stocks, tobacco stocks and retail stocks.
Examples in this sector: Walmart, Coca-Cola and Procter & Gamble
Health Care
Here you will find stocks of companies that provide medical goods and services that enhance the quality of life. The companies fall under two main industry groups: Health Care Equipment & Services and Pharmaceuticals, Biotechnology & Life Sciences. Drug stocks, medical device stocks and health care stocks are all part of this sector.
Examples in this sector: Pfizer, Johnson & Johnson, Moderna and Medtronic.
Financials
The financials sector, also known as the banking sector, contains a range of financial stocks. These companies provide banking, financial services, consumer finance, capital markets, insurance and mortgage activities. The companies fall under four main industry groups: Banks, Diversified Financials, Insurance and Real Estate. Banking stocks, insurance stocks, mortgage stocks and fintech stocks are all included.
Examples in this sector: Visa, JPMorgan Chase, Berkshire Hathaway and Wells Fargo
Information Technology
This can be considered the ‘tech sector’ and is made up of certain tech stocks that are contributing to the technological innovation of our society. You will find companies that offer software and information technology services, or manufacture and distribute technology hardware and equipment. The companies fall under three main industry groups: Software & Services, Technology Hardware & Equipment and Semiconductors & Semiconductor Equipment. Therefore, this sector consists of SaaS (software as a service) stocks, semiconductor stocks, cloud computing stocks and more.
Examples in this sector: ASML, Microsoft, Apple, NVIDIA, Intel and Amazon
Communication Services
This is one of the newer sectors, which contains companies that provide various types of communication and information services, such as telecommunication, media, entertainment and internet. The companies fall under two main industry groups: Telecommunication Services and Media & Entertainment. Within this sector, you will find telecommunication stocks, streaming services stocks and communication services stocks.
Examples in this sector: AT&T, Netflix, Disney and Alphabet
Utilities
In the utilities sector, there are stocks of companies providing an array of utility services, such as electric power, natural gas and water. The utilities group includes companies that engage in generation and distribution of electricity using renewable and non-renewable sources, transmission and distribution of natural gas and provision and treatment of water and wastewater.
Examples in this sector: NextEra Energy, Duke Energy, Enel and Southern Company
Real Estate
Previously part of the financial sector, the real estate sector contains companies that own, operate or invest in real estate properties, such as residential, commercial and industrial properties. It also includes real estate investment trusts (REITs) that own and lease properties and collect rent. Real estate investing stocks all part of this sector.
Examples in this sector: American Tower, Simon Property Group, Prologis and Equity Residential
Why are the GICS important?
The GICS serves as a valuable tool for investors to analyse and compare companies across sectors. This can help you analyse and compare the performance of companies across different markets and regions, as well as to identify trends and investment possibilities in various sectors. Each sector has its own characteristics, risks and opportunities.
Therefore, researching and increasing your knowledge about the different sectors and the companies within them can help you to make more informed investment decisions that align with your financial goals and values. The stock market reflects our ever-changing world and sectors adapt to technological advancements, societal shifts and economic trends. It is wise to recognise that what may be a prominent sector today might undergo significant transformations in the future. Companies may come and go, and classifications can always be changed. Staying informed about emerging industries, technological innovations and global developments is essential for navigating these changes effectively. It is good to embrace adaptability, recognising that flexibility and an awareness of evolving trends are key to long-term strategies in the dynamic landscape of stock market sectors.
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