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Stock Sectors - How to Classify Stocks
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Manikamaniko.
Master |
03-Sep-2007 12:08
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By the way, Max Gunther's book casn be easily obtainable at the big local bookshops...
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Manikamaniko.
Master |
03-Sep-2007 12:00
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Singaporegal... DaJieJie... :)
But in the end, one must be mature and really understand the true nature of risk before dashing in... |
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singaporegal
Supreme |
02-Sep-2007 22:01
Yells: "Female TA nut" |
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Huh? What are the Zurich Axioms? Sounds really chim |
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Manikamaniko.
Master |
01-Sep-2007 00:10
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Singaporegal... :) |
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singaporegal
Supreme |
31-Aug-2007 23:06
Yells: "Female TA nut" |
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Hi Mani, Thanks for recommending my guru's book. BTW, I always see you putting in that link. Is that some kind of referral program? |
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Manikamaniko.
Master |
31-Aug-2007 10:41
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Previously I had recommended Larry Williams' book "Long-Term Secrets" which is followed successfully by Singaporegal in her trading... :) |
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KiLrOy
Master |
30-Aug-2007 21:15
Yells: "I buy only what I can see." |
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tanglinboy, as long as it make sense and you enjoy the read. :) thanks |
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tanglinboy
Elite |
30-Aug-2007 20:49
Yells: "hello!" |
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Good post KilRoy! |
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baseerahmed
Master |
30-Aug-2007 00:36
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in our local context , which are the 9 ... ? |
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popdod
Member |
30-Aug-2007 00:04
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So in short, pick the leader (best company, best earnings) in the cyclical stocks and you will have 9 winning stocks in your folio. 
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KiLrOy
Master |
29-Aug-2007 20:39
Yells: "I buy only what I can see." |
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One of the ways INVESTORS classify stocks is by type of business. The idea is to put companies in similar industries together for comparison purposes. Most analysts and financial media call these groupings ?sectors? and you will often read or hear about how certain sector stocks are doing.
One of the most common classification breaks the market into 11 different sectors. Investors consider two of there sectors ?defensive? and the remaining nine ?cyclical.? Let?s look at these two categories and see what they mean for the individual investor. DefensiveDefensive stocks include utilities and consumer staples. These companies usually don?t suffer as much in a market downturn because people don?t stop using energy or eating. They provide a balance to portfolios and offer protection in a falling market. However, for all their safety, defensive stocks usually fail to climb with a rising market for the opposite reasons they provide protection in a falling market: people don?t use significantly more energy or eat more food. Defensive stocks do exactly what their name implies, assuming they are well run companies. They give you a cushion for a soft landing in a falling market. Cyclical stocksCyclical stocks, on the other hand, cover everything else and tend to react to a variety of market conditions that can send them up or down, however when one sector is going up another may be going down. Here is a list of the nine sectors considered cyclical:
Most of these sectors are self-explanatory. They all involve businesses you can readily identify. Investors call them cyclical because they tend to move up and down in relation to businesses cycles or other influences. Basic materials, for example, include those items used in making other goods ? lumber, for instance. When the housing market is active, the stock of lumber companies will tend to rise. However, high interest rates might put a damper on home building and reduce the demand for lumber. How to UseStocks sectors are helpful sorting and comparison tools. Don?t get hung up on using just one organization?s set of sectors, though. One of the ways to use sector information is to compare how your stock or a stock you may want to buy, is doing relative to other companies in the same sector. If all the other stocks are up 11% and your stock is down 8%, you need to find out why. Likewise, if the numbers are reversed, you need to know why your stock is doing so much better than others in the same sector ? maybe its business model has changed and it shouldn?t be in that sector any longer. ConclusionYou never want to be making investment decisions in a vacuum. Using sector information, you can see how a stock is doing relative to its peers and that will help you understand whether you have a potential winner or loser. |
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