According to the Cambridge Dictionary, a stock sector can be described as one of the areas or industries of activity in which firms who engage in the trade of shares on a specific stock market are distinguished.
Further explanation: There are many sectors in the stock market so it is essential to highlight that every stock is classified in a sector. In general, these sectors represent the economy’s overall divisions. To understand sectors in a better way, you can view them as categories.
The Different Stock Sectors
There are 11 distinct stock sectors that are provided by the Global Industry Classification Standard. Below is a breakdown of each sector and what they specialize in.
1. Energy
This sector comprises of gas, fuel firms, oil, coal, in addition to energy services and equipment. The latter can be perceived along the lines of companies that create oil-drilling machinery as well as those that oil enterprises hire.
Key players: Shell, Kinder Morgan, BP, Halliburton, Chevron, and Exxon. These corporations generate a lot of money in profit each quarter and have lucrative dividends.
2. Essential materials
They include packaging, chemicals, metals, paper, and construction equipment companies. Such firms can be found at the onset of the supply chain. They sell their commodities to other companies.
Key players: Valvoline, Sherwin-Williams, Ecolab, DowDuPont, and Scotts Miracle-Gro.
3. Industrials
The airlines, aerospace, machinery, manufacturing, and defense firms are in this category. Like oil companies, the industrials generate a lot of cash flow and have steady dividends.
Key players: Delta, Deere, UPS, 3M, Boeing, Honeywell, among others.
4. Consumer Discretionary
These are corporations where we people spend massive amounts of their money. They include apparel, hotels, retailers, and household products.
Key players: Amazon, Starbucks, Ford, and Target. People eat, travel, and shop through these corporations.
5. Customer Staples
They include the tobacco, beverage, and food firms and are also manufactures of personal products and household supplies.
Key players: Coca-Cola, Walmart, Procter and Gamble, and many more. Most probably, you have heard of these companies since they sell their products to you.
6. Healthcare
Corporations in this sector entail the pharmaceuticals, healthcare services, and medical equipment.
Key players: UnitedHealth, Johnson and Johnson, Pfizer, and Medtronic are among the large firms in this group. They are often safe bets, as people constantly require medical care.
7. Financial
This sector consists of real estate firms, insurance, and banks.
Key players: Wells Fargo, Goldman Sachs, JP Morgan, and U.S. Bank as well as other regional banks.
8. Information Technology
Companies in this category include software, data processing, semiconductor, and internet firms. This is one of the domineering sectors in the last couple of years.
Key players: Intel, Adobe, Microsoft, and Visa, among others.
9. Communications
They entail corporations in the communication services. A majority of them depend intensely on recurring revenue.
Key players: Facebook, Verizon, Netflix, Google, and Comcast.
10. Utilities
These include gas, water, and electric companies. They have little or no rivalry in the regions they operate.
Key players: They function in regional areas; however, you can relate to utilities like Xcel, Duke Energy, NextEra, NRG, and PG&E.
11. Real Estate
They are referred to as real estate investment trust (REITs). Real estate developers are also included in this last classification.
Key players: Simon Property Group, Aimco, and AvalonBay Communities.
Tips and Tricks of the Trade
In order to trade and access the diverse stock sectors, it is fundamental to have a brokerage account.
Each sector can be traded through an exchange-traded fund (ETF). ETFs can be considered as a group of stocks positioned in one fund. You can purchase that fund as a way to diversify your portfolio with one financial product.
Outside companies manage ETFs; therefore, there are fees incurred.
Concluding remark: Stock sectors may not be a thrilling element of your trading education; however, it is critical to understand as you further your knowledge in the investing world.
Fruitful trading!