Are you looking to invest in a particular stock market sector but are still deciding whether to invest in a specific company within that sector? This article will hopefully give you some help, as here we look at all 11 of the Global Industry Classification Standard (GICS) sectors and provide tips and recommendations on what to look out for.
These 11 GICS sectors exist to make it simple to compare businesses with similar business concepts. If you want more details on these 11 GICS Sectors, we look at that in one of our previous articles. Again, as for Brite, our investment philosophy is based on taking the long view and considering protection first, as nobody knows what’s around the corner.
*Please note – market fluctuations are normal and it’s important to consider the long view when investing. These recommendations were from March 2023.*
Sector 1: Energy
The global economy depends on the energy sector. It generates and supplies the electricity and fuel required to keep the economy running smoothly. Some energy leaders stand out due to their size and financial clout.
Brookfield Renewable is a global producer of renewable energy with a sizable backlog of renewable energy development projects. Brookfield anticipates increasing its cash flow per share by up to 20% annually through 2026 when paired with other growth drivers like acquisitions and higher power pricing.
ConocoPhillips is a natural gas and oil producer with a diverse product mix that stands out for having low operating costs. Its average supply cost is less than $30 per barrel, and its robust balance sheet supports this cheap supply cost.
Sector 2: Materials
The materials industry is crucial for investors since it provides the raw materials required to create the items we use daily, and the following stands out in the market.
One of the top mining firms in the world is Rio Tinto. The London-based firm produces the three most important industrial metals, copper, aluminium, and iron ore. Rio Tinto also has some of the lowest operating costs in the world and a solid balance sheet.
Nucor is North America’s largest and most varied manufacturer of steel and steel-related products. Nucor is also the biggest recycler of steel on the continent and has a long history of producing free cash flow throughout the market cycle thanks to its cheap and changeable cost structure.
Sector 3: Industrials
The industrial sector is classified as a secondary sector in the global supply chain, one of the three major market divisions. It, therefore, is said to be a foundation of the economy. Some of the best long-term durability in the industry can be found in these industrial stocks.
Waste Management is one of North America’s top waste management businesses. They have spent money automating their fleet of collection vehicles and converting them to operate on cleaner, more affordable natural gas over the years. These actions have given Waste Management the free cash flow to make acquisitions.
FedEx provides customers with business, e-commerce, and transportation services. Due to its healthy financial cash flows, FedEx can make investments in innovation. By 2040, it hopes to achieve carbon neutrality while providing stockholders strong financial returns.
Sector 4: Utilities
Generally speaking, utility equities are reliable investments. Even during a recession, demand for utilities like electricity, natural gas, and water delivery typically stays mostly the same. The finest utility investments are businesses with a robust financial standing and foreseeable development.
Several utility industries are run by Brookfield Infrastructure, which has produced a steady cash flow that has increased over time. As the economy grows, Brookfield gains from a larger volume, inflation-linked rate increases, and the opportunity to finish expansion projects.
In Florida, NextEra Energy runs a regulated electric company. Their ability to finance their investments is made possible by NextEra’s sound financial standing. According to its profile, it has one of the most substantial credit ratings among major rate-regulated electric utility providers.
Sector 5: Healthcare
Everyone will eventually require healthcare, and investors will always have good opportunities when there is a product that everyone needs. Over the long term, the outlook for healthcare stocks as a whole seems positive. Technology advancements and global aging population trends should create enormous potential for healthcare businesses.
Vertex Pharmaceuticals is one of the best biotech stocks on the market. The company’s main area of interest is creating medications to tackle cystic fibrosis with Trikafta, a novel Cystic Fibrosis medication. This development may increase the number of patients Vertex’s drugs can treat by more than 50%, giving the stock good potential for the future.
The top health insurer on the planet is UnitedHealth Group. Due to the organisation’s size, reliability, and dividend, it has one of the most alluring payer stocks on the market. With its upcoming takeover of home health services company LHC Group, UnitedHealth Group may soon expand its presence in the healthcare sector.
Sector 6: Financials
Most people think of banks when they hear the phrase “financial industry.” However, the sector also includes other business types. It’s important to know financial stocks are often cyclical (particularly bank stocks), which makes them susceptible to a decline in value during downturns. Financial companies vary tremendously in terms of functions, sizes, and growth potential.
Visa and Mastercard run the largest payment networks in the world, this makes Visa a wise investment choice given the company’s size and influence. Currently, the firm processes an annual payment volume of around $12 trillion.
As for banks, the biggest bank in the United States and the most prominent business overall in the financial industry is JPMorgan Chase. The bank consistently records some of the highest industry-wide profitability metrics meaning it is always something to look to if you consider investing in this sector.
Sector 7: Consumer Discretionaries
Focusing on well-known brands and market leaders in this sector is typically a recipe for success, as consumer discretionary stock prices have the propensity to increase and fall with the general economy, making them cyclical equities.
Nike has a significant market share in athletic clothing and footwear. Despite the pandemic’s slower revenue growth, the business nevertheless produced substantial profits, outperforming rivals like Adidas and Under Armour.
Starbucks significantly impacts how a significant portion of the global population begins each day, given the consumer demand for coffee drinks. There are plenty of prospects for expansion as the corporation anticipates having 55,000 sites by 2030, with more than 34,948 sites as of April 2022.
Sector 8: Consumer Staples
Because consumer staples companies operate non-cyclically, they provide investors with stability during downturns. They may not see the highest earnings increase, but the low price volatility, consistent earnings, and dividends of these equities make up for the modest growth.
One of these companies is Procter & Gamble, responsible for brands such as Tide, Gillette, and Crest. Like other retailers of everyday goods, P&G benefited from the pandemic; however, the business’s performance since then has been solid, with organic revenues increasing by 10% in the third quarter of its fiscal year that ended on June 30, 2022.
PepsiCo is not just the beverage company of the same name, it also runs Frito-Lay, Quaker, Mountain Dew, and Gatorade. PepsiCo has attained the title of Dividend King by increasing its quarterly payout for 50 straight years, demonstrating that it is a desirable asset for income investors.
Sector 9: Information Technology
The FAANG stocks include Alphabet (Google), Amazon, Apple, Netflix, and Meta (formerly Facebook). The businesses are market leaders in their respective fields, and their stocks have generated excellent gains over the past ten years. However, that winning streak ended in 2022 when the market as a whole and nearly all significant tech stocks declined.
At this moment, it does not look like a sector that would create a good return on investment, but of course, this sector has been very profitable in the past, so its outlook could change. If you want more information on this sector or any others, you can contact an advisor at Brite to learn more.
Sector 10: Communication Services
The capacity to transmit and receive information across distances becomes more crucial as we become more linked. Therefore the communications industry will keep creating important and valuable businesses.
The top wireless phone and internet supplier in the U.S. is T-Mobile. It has developed one of the largest 5G networks, and its reach far exceeds that of its main rivals. Given the strength of its branding and service, T-Mobile should be able to draw many more customers in the future.
The biggest cable television and internet provider in the USA is Comcast. While the number of paid T.V. subscribers is still declining, the number of broadband subscribers is increasing. Comcast is in a solid position to take on wireless providers. Its cable network requires little upkeep, and it can upgrade service with low incremental costs.
Sector 11: Real Estate
Since most of us will never purchase anything more expensive than a house, the housing market has a disproportionately large impact on the U.S. economy. Here are a few notable businesses whose stocks would be excellent additions to a portfolio of investments.
A builder of high-end homes in the United States, NVR offers a variety of new-entry, move-up, and residential properties. NVR has established itself as a competent risk manager over time. As a result of its ability to capitalise on millennials’ desire for homeownership, the business has experienced some of the fastest growth in its sector.
By charging reduced sales fees and utilising technology to streamline and reduce costs, Redfin is seeking to upend the conventional home-buying process. Redfin is anticipated to expand quickly without having to significantly undercut the market leaders in the sector.
Before you invest, you should always be aware of the risks. When undertaking market analysis, a company’s whole perspective should be considered rather than just one or two measures. Additionally, remember that stocks are best used as long-term investment vehicles.
Brite investment portfolios offer a distinct advantage as they provide a low-cost, end-to-end solution. This transparent investment approach broadly tracks the market delivering better returns and, over time, can consistently grow your assets.
Our investment platform lets you decide your investment approach based on your goals and attitude to risk. We then do all the hard work using our asset management professionals and technology to execute fund trading.
Market volatility is a regular occurrence, however, over the long term, the stock market has always proved to be the best way of growing your money. Contact Brite here if you want to learn more about how we invest: https://www.brite-advisors.com/contact/