A look at Industry Sectors and Sub-Industries

Industry Sectors

The S & P 500 companies can be divided in to 10 sectors:

• Consumer Discretionary (82)
• Consumer Staples (42)
• Energy (41)
• Financials (84)
• Health Care (53)
• Industrials (63)
• Information Technology (66)
• Materials (29)
• Telecommunications Services (7)
• Utilities (33)

Many different companies (stocks) belong to each of these sectors, as you can see from the numbers in brackets (counting only the S&P 500 companies). In order to further distinguish different companies in each sector, the stocks are grouped in sub-industries...

Sub-Industries

Overall the S&P 500 currently contains stocks belonging to 102 different sub-industries. As an example: here is a list of the 15 biggest sub-industries (measured by the number of S&P 500 companies belonging to each sub-industry):

1. Diversified Financial Services
2. Industrial Conglomerates
3. Multi-Utilities & Unregulated Power
4. Health Care Equipment & Services
5. Banks
6. Internet Software & Services
7. Oil & Gas Exploration & Production
8. Packaged Foods & Meats
9. REITs
10. Semiconductors
11. Broadcasting & Cable TV
12. Specialty Stores
13. Property & Casualty Insurance
14. Pharmaceuticals
15. Apparel, Accessories & Luxury Goods

In order to put some colour on some of these sub-industries here are examples of better-known companies and their respective sector and sub-industry:

• Abercrombie & Fitch Company (ANF): Consumer Discretionary / Apparel, Accessories & Luxury Goods
• Wal-Mart Stores (WMT): Consumer Staples / General Merchandise Stores
• Exxon Mobil Corp. (XOM) : Energy / Integrated Oil & Gas
• Bank of America Corp (BAC): Financials / Banks
• Johnson & Johnson (JNJ): Health Care / Health Care Equipment & Services
• Boeing Company (BA): Industrials / Aerospace & Defense
• Apple Inc. (AAPL): Information Technology / Computer Hardware
• Dow Chemical (DOW): Materials / Diversified Chemicals
• Verizon Communications (VZ): Telecommunications Services / Integrated Telecommunications Services
• FirstEnergy Corp (FE): Utilities / Multi-Utilities & Unregulated Power

It is interesting that Apple is grouped under "Computer Hardware".  It shows that the grouping into sectors and sub-industries is not perfect, especially if you consider companies that operate in many fields. We would have to check how much revenue and income Apple generates from hardware vs. software in order to assess if this is still the right sub-industry for Apple.

Another important concept that builds upon the grouping of stocks into industry sectors is the so called "sector rotation". But that is a topic for another post...