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Chapter 7 — INDUSTRIAL SECTORS
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INDUSTRIAL SECTORS

INDUSTRIAL SECTORS

The differences are often confused between a "Sector" and an "Industry". Both terms are used to categorize a group of companies that provide similar services.

A sector describes a large segment of the economy that groups companies based on a broad generalization. For example, the technology sector includes companies that produce electronics, software, and computers.

An industry describes a much smaller segment of the economy and groups companies based on a narrow generalization.

INDUSTRIAL SECTORS

BASIC MATERIALS SECTOR

This sector includes companies that are involved with the discovery and refinement of raw materials. It includes companies that are involved with metals, chemicals, and forestry products. It is sensitive to changes in the business cycle.

See more about Basic Materials here: https://www.sprinklebit.com/education/chapter/sectors-and-industry/basic-materials
 

CONGLOMERATES SECTOR

A conglomerate is a large corporation that owns several smaller companies, often in unrelated industries. The conglomerates' sector is made up of these types of companies and the goal of many conglomerates is to have enough diversification to be unaffected by economic conditions.

See more about Conglomerates here: https://www.sprinklebit.com/education/chapter/sectors-and-industry/conglomerates

 

CONSUMER GOODS SECTOR

Consumer goods are items purchased by individuals instead of businesses. The consumer goods sector includes companies involved in food and drinks production, clothing, automobiles, and electronics. Parts of this sector are sensitive to the business cycle. When there is economic growth, there is more demand for luxury items such as cars. Goods that are considered a necessity, such as food, are generally unaffected.

 

FINANCIAL SECTOR

The financial sector is defined by firms that provide financial services to businesses and consumers. It includes banks, investment funds, insurance, and real estate companies. This sector is sensitive to the business cycle because when times are good firms will take out more loans to use for business expansion.

 

INDUSTRIAL GOODS SECTOR

This sector includes companies that produce goods that are used for construction and manufacturing. The industries under this sector are industrial machine tools, construction, cement and metal fabrication, and aerospace and defense. It is heavily affected by the business cycle. When the economic situation is rough, companies will postpone expansion and spend less money on industrial goods.

See more about Industrial Goods here: https://www.sprinklebit.com/education/chapter/sectors-and-industry/industrial-goods

 

HEALTHCARE SECTOR

Defined by stocks that relate to medical or healthcare goods and services. It includes biotech, hospital management, and medical device or pharmaceutical firms. The healthcare sector is not affected by the business cycle because people will always be willing to pay for medical attention if they need it.

 

SERVICES SECTOR

This is the section of the economy that produces services rather than products. It includes trucking, mail services, information services, waste management, IT, and financial services. Approximately two-thirds of the US economy is in the service sector.

 

TECHNOLOGY SECTOR

Stocks in the technology sector are involved with the development of technologically based goods and services. It includes companies that produce electronics, software production, and computer products related to information technology. The technology sector covers a very broad range of products and often thrives when a new generation of technology comes out that requires businesses and consumers to make technology upgrades. For this reason, it is somewhat affected by the business cycle because consumers are likely to postpone upgrades when economic growth is slow.

 

UTILITIES SECTOR

Utilities mean gas, electric, and water. Firms that provide these services are in the utility sector. The utility sector is generally unaffected by economic conditions because gas, electric, and water are considered essential for everyday life.

Quiz

If a company is part of the computer industry, can it also be part of the technology sector?

Correct
Incorrect
0/76 (0%) Correct
  • 1
    No, a sector is different from an industry.
  • 2
    No, the computer industry is not part of the technology sector.
  • 3
    Yes, the technology sector is part of the computer industry.
  • 4
    Yes, the computer industry is part of the technology sector.
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Alex's thoughts: 
For example, Nike is in the Textile-Apparel Footwear & Accessories industry which is a part of the Consumer Goods sector.

I like to diversify my portfolio in many different sectors as they are affected differently when the market is changing. This is to avoid putting all my eggs in one basket.

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