Sectors

In the ICB classification Sectors are the third level under Supersectors and above Sub-Sectors. Companies with similar business activities, products, and economic sensitivities are in the same Sector or a similar Sector.

Companies listed on the Stock Market, are classified into 4 different levels. In the ICB classification from FTSE Russell this starts at Industry, then Supersectors, Sectors and Sub-Sectors. Thus, Sector is the Third level of this classification and represents a group of companies with similar business activities such as, Banking, Insurance, Chemicals and economic sensitivities, Cyclical v Non-Cyclical. Dividing the Stock Market into the different Sectors, assists in understanding sector dynamics and comparing intra sectorial valuations. Investing in Stocks should not be limited to inter Sector Valuations. A Software Company such as Microsoft, has little in common with a Mid Cap Software Company. The Valuation comparison should be made with a similar sized Large Cap Company with similar Valuation and Risk Metrics, such as Volatility.