Sectors of the stock market
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Thread: Sectors of the stock market

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    Sectors of the stock market

    Economic sector is one of the key concepts for a stock trader, the knowledge about specifics of the economy sectors and the quotation’s behavior of companies in each sector helps the trader to form the right investment strategy, to make a balanced investment portfolio. Ability to handle industry indices helps to determine the trend in the market, which industries and companies currently "reign" the industry, and which are underestimated and therefore worthy of our attention.

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    The stock market is often divided into 14 major sectors representing key areas of the economy.:
    1. Financials
    2. Industrials
    3. Energy
    4. Raw Materials
    5. Technology
    6. Telecommunications
    7. Software/Internet
    8. Healthcare
    9. Utilities
    10. Real Estate
    11. Trade
    12. Tourism and Vacation
    13. Transport
    14. Media



    In turn, each sector is divided into industries.
    Next we shall discuss each sector in details.

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    1. Financials

    The financial sector is the largest capitalization sector of the US stock market.
    Finance, investment and management companies; Brokerage firms; Insurance companies; Commercial and investment banks
    Biggest banks: Goldman sachs (GS), J.P. Morgan and Chase (JPM), Citigroup (C).
    Insurance companies: Berkshire Hathaway Inc (BRKa), American International Group Inc (AIG).
    Stock exchange: CME Group Inc (CME).

    ETF of the financial sector has XLF ticker.

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    2. Industrials

    The industrial sector includes heavy, chemical and steel industries, manufacturers of capital equipment.
    Sector’s index - $DJUSIN.
    ETF of the industrial sector has XLI ticker.

    This sector comprises such giants of the US industry as Du Pont (DD), General Electric (GE), Textron (TXT), Ryder System (R), The Dow Chemical (DOW).


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    3. Energy

    The total capitalization of the US energy sector is 4.47 trillion dollars. The sector includes companies engaged in the extraction, processing and transportation of oil, gas (natural and shale) and coal. This sector also includes companies which manufacture equipment for the gathering of those natural resources.
    A characteristic feature of the shares of this sector - often they tend to be different from the general market trends: Their price don’t fluctuate along with the market, but with oil (gas, coal) price instead.
    This sector includes such giants as EXON MOBILE (ХОМ), Marathon Oil Corporation (MRO), Suburban Propane Partners LP (SPH), Peabody Energy Corp (BTU).
    ETF of the energy sector – XLE.

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    4. Raw Materials


    This sector includes companies that engage in gathering and processing of metals, chemical companies and manufacturing of construction materials.
    The most important companies of this sector – Australian mining company BHP Billiton (BHP – ticker on NYSE and Australian stock exchange, BLT – ticker on LSE), Anglo-Australian mining and metallurgical concern Rio Tinto plc (RIO) and the largest US aluminum manufacturer Alcoa Inc (AA).
    This sector also includes manufacturers of chemical fertilizers: one of the largest manufacturers of herbicides Monsanto Company (MON).
    For those who wish to make a bet on growth of this sector – there is ETF with XLB ticker, which includes shares of 30 largest companies of this sector.

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    5. Technology


    This sector includes manufacturers of electronics, computers, processors, mobile phones, semi-conductors, etc…
    It’s the fastest growing and, in my opinion, the most interesting sector of the stock market.


    Main companies of this sector: Intel Corporation (INTC), International Business Machines (IBM), HP Inc (HPQ), Texas Instruments Incorporated (TXN).
    Among the non-US largest companies of this sector, one can name Japanese electronics manufacturers Panasonic Corp. и Sony Corp. (Shares of those corporations are traded on Tokyo stock market).



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    6. Telecommunications

    In some sources “Telecommunications” is not a separate sector, but is joined with “Technology” (Telecommunications and Technology).
    The main “blue chips” communication industry is a transnational communications company AT&T Inc (T) and US telecommunication company Verizon Communications Inc (VZ).
    Also closely related to “Telecommunications” is 7. Software/Internet.

    Microsoft (MSFT), Cisco systems (CSCO), Google (GOOG) and Facebook Inc (FB) are the leaders of the “Software/Internet” sector. Sometimes this sector is labeled as “Information Technology”.

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    8. Healthcare

    This sector includes companies engaged in the manufacturing of medicines, the manufacturing of medical equipment, as well as organizations that specialize in medical care (hospitals, etc…). Biotechnologies, manufacturing of vaccines against incurable diseases – are all part of the “Healthcare” sector.
    The most famous companies of this sector - Pfizer Inc (PFE), Amgen Inc (AMGN), Merck (MRK), Omnicare (OCR).
    The sector's capitalization exceeds 4.5 trillion dollars.
    The sector is of great interest to investors: this year the sector's securities grew by an average of 19% (according to this year’s results, only exceeded by IT sector (+26%)).

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    There are so many divergent views on the number of sectors of the stock market . Some people believe it is ten , some people say it is eleven and from what is shown in this thread , one could see that it is twelve.Well , there is no hard and fast rule in the sectors we have in the stock market , each market has its own set of sectors and analysts use their own classifications.I am of the opinion that a trader should look at the sector that is best performing and pick his stock there though he will still need to look at some other sectors as well because the sector that is considered not performing up to expectation might just suddenly be on the rise

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