Fisher Investments on Energy

3

ENERGY SECTOR BREAKDOWN

Now you’ve got the general basics and Energy’s high-level drivers. But keep in mind a sector is really a broad category made of many distinct parts. Any good anthropologist knows “America” is too broad and diverse to understand as a single entity. Instead, one would study regions and states and see how they fit together to understand the whole country. The same is true for the Energy—and any other—sector.

Chapter 1 covered the major industries: Oil & Gas (O&G) and Energy Equipment & Services (EES). But even within those major components, differing sub-industries exist, each with unique characteristics and economic drivers, often interrelated in some way. Before you can make any portfolio decisions, you must understand what a sector looks like and what makes each distinct component tick. This chapter explores the sub-industries and how an investor can form an opinion on each. We’ll answer questions like: What economic drivers are important for each industry? How do they fit with the rest of the sector? How do separate industries work in tandem or against each other?

GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS)

Before we begin, some definitions. The Global Industry Classification Standard (GICS) is a widely accepted industry framework for classifying firms based on similarities. GICS was developed by MSCI, an independent provider of global indexes and benchmark-related products and services, and Standard & Poor’s, an independent international financial ...