Fisher Investments on Industrials

4

INDUSTRIALS SECTOR BREAKDOWN

 

 

Now you’ve got the basics of how the Industrials sector works, an understanding of its history, and its high-level drivers. But a high-level understanding is just the beginning. Just like our overall economy, the sector is made of many distinct parts—some relatively similar to others and some quite unique. To better understand the whole, you must understand the parts.

Chapter 1 covered the basic types of Industrials stocks: Capital Goods, Transportation, and Commercial Services and Supplies. But within those classifications, there are numerous types of firms with very different product lines, end markets, and drivers. While an understanding of every company isn’t necessary, a firm grasp on the major industries is vital before making any sector-related portfolio decisions. This chapter explores the sector’s industries and how an investor can begin forming opinions on each.

GLOBAL INDUSTRY CLASSIFICATION STANDARD (GICS)

Before beginning, some definitions: The Global Industry Classification Standard (GICS) is a widely accepted framework for classifying companies into groups based on similarities. The GICS structure consists of 10 sectors, 24 industry groups, 68 industries, and 154 sub-industries. This structure offers four levels of hierarchy, ranging from the most general sector to the most specialized sub-industry:

• Sector

• Industry group

• Industry

• Sub-industry

Let’s start by breaking down the Industrials sector into its different components. ...