Evaluating stocks, bonds, mutual funds and ETFs is essential before investing. Most people know to look at financial statement data, ratios and valuation statistics, technical analysis charts and analyst opinions, but you can learn a lot about a potential investment by researching the investment’s industry and sector.
An industry is a classification that refers to a group of companies that are related in terms of their primary business activities. Industries are then grouped into larger categories called sectors. Examples of sector classifications are broad categories like consumer goods or energy; industry classifications are narrower, such as semiconductors or mortgage investments.
The North American Industry Classification Systemis used by the statistical agencies of the government to collect, analyze and publish sector and industry data. NAICS codes are used in the U.S., Canada and Mexico and include six digits, with each digit narrowing the category further. The first two digits designate the economic sector; the third specifies the subsector; the fourth digit is the broad industry group; the fifth is the NAICS industry; and the last denotes a national industry. However, many resources, such as the Web sites listed here, use proprietary classification systems, meaning a stock might be classified slightly differently.
Certain sectors might have “normal” levels for ratios (such as the price-earnings ratio) that are generally higher or lower than the broader market. Knowing this information can help you assess an individual company’s performance relative to its peers. You can also use sector and industry analysis to find areas that are expected to outperform the general market in the future, or to avoid those that are expected to underperform.
The following are Web sites that offer a range of industry and sector data and statistics.
Yahoo! Finance’s Industry Center is devoted solely to industry data. The home page shows the day’s top-performing industries and compares their performance to the S&P 500 index. The worst-performing industries are also listed with performance data.
The left side of the page lists top industries in alphabetical order. There is a link to a full list that can be sorted by sector or alphabetically.
Data on individual industries includes current news and commentary, a market summary for the day and the top-performing companies as well as the largest companies by market capitalization within the industry. An industry calendar shows upcoming earnings releases for companies within the industry as well as the top-ranked industry analysts and their recommendations. Finally, industry statistics such as market capitalization, price-earnings ratio and price-to-book ratio, return on equity, and dividend yield are given.
One interesting feature is a chart showing the most active stock discussion boards for companies within an industry. Yahoo! Finance offers message boards for every stock traded.
One issue with some lesser-known industries is that data can be missing or not regularly updated.
You can also access industry statistics and data through the individual company data pages. Simply choose “Industry” from the left-side menu bar.
Overall, Yahoo! Finance’s Industry Center provides a good amount of data on industries, and it is free.
Industry classification on Yahoo! Finance is provided by Morningstar.
BusinessWeek also has an entire section devoted to sector and industry data (first choose “Companies” then “Sectors & Industries”). Each sector is listed with performance data and ratios. Links to related news are found below this table, as well as a list of the most popular sectors in the news over the last week.
For more information about each sector and its industries, click the sector name. You’ll see a list of the industries with performance data and ratios; clicking on the industry brings up its top companies. Again, news stories relating to the specific industries are listed at the bottom of the page. One interesting detail given is a count of the number of industries in each sector and the number of companies in each industry.
While BusinessWeek’s sector and industry data is fairly basic, it is presented in an easy-to-read format and is free.
CNBC’s stock data offerings include an industry and peer comparison table for individual stocks. After entering a ticker symbol or company name into the Search box, choose “Peers” from the tabbed menu bar. A list of the top competitors in the industry is shown, and you can choose up to four of these companies for comparison in a price and volume chart.
Also, you can compare a company’s valuation ratios, per share data, profitability ratios, dividends, growth rates, and financial strength data to those of its industry and its sector.
CNBC’s data is provided by Reuters and is free.
MarketWatch provides lists of the top industry performers based on Dow Jones indexes (click Sector Indexes under Tools & Research). Lists of the best- and worst-performing industries over various customizable time periods are found. A unique feature is the ability to set up E-mail alerts based on industry news. These alerts can be sent out immediately or compiled and sent in a single E-mail each day.
MarketWatch data and alerts are free, however, you must be a registered user to set up E-mail alerts.
Industry data is provided by Dow Jones.
Morningstar offers a comprehensive Web site for investors that includes detailed sector and industry data and information. To find industry and sector data, go to the “Stocks” tab at the top of the home page, then choose “Sectors” or “Industries” from the left menu bar under Performance.
The data consists of returns for various periods. To learn more about the make-up of a specific sector or industry, you can click the category name. Lists of the largest 100 companies by market cap and the top 100 performers in each category are given, along with performance data.
In addition to these specific sections, you can learn about the sector and industry for an individual stock by typing the ticker symbol or company name in the quotes search. The “Industry Peers” tab provides data for comparison with a company’s competitors as well as the industry average.
Finally, Morningstar’s Portfolio X-Ray area allows you to compare your portfolio’s sector weightings with that of the S&P 500.
Access to the basic industry and sector data at Morningstar is free. The Portfolio X-Ray tool requires a premium membership, which costs $18.95 per month.
The U.S. Census Bureau provides data on the NAICS classification system. An FAQ section answers general questions about the system, the data and how to access it. The most recent list of NAICS sector codes is available for download.
The site also gives a detailed description of each NAICS category along with numbers for reference. This data is free and can be accessed by choosing “NAICS” from the U.S. Census Bureau home page.
By choosing “Business and Industry” from the home page, you can access economic statistics from the latest available censuses. Surveys include a general economic census, capital expenditures and sector-specific data for construction, government, mining, manufacturing, retail, wholesale trade, international trade, and services.
A calendar of upcoming data releases as well as historical time series data are all found at the site for free.
The Wall Street Journal Online’s Market Data Center provides a wealth of data for investors on stocks, bonds, mutual funds and other investments. The center is also where you’ll find industry and sector data. You can access this area by choosing the U.S. Stocks tab.
The Industry Group Tracker shows each sector with a breakdown of industries and its performance over a customizable time period. Detailed data includes a current quote for the Dow Jones index tracking the industry, lists of the best- and worst-performing stocks within the industry, performance charts for the entire industry, as well as comparison charts for various stocks within the industry.
The Map of the Market, provided by SmartMoney, allows you to track the status of more than 500 stocks at once, with data updated every 15 minutes. Each colored rectangle in the map represents an individual company. The rectangle’s size reflects the company’s market capitalization and the color shows whether price performance is up, down, or neutral. The map is divided into sectors with the largest stocks in each sector displayed.
Access to the Wall Street Journal Online’s Market Data Center is free.
Data is provided by Dow Jones.