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Duration: 5:39

Instructor:

Contributor: Interactive Brokers

Level: Beginner

Let’s take a tour of SPDR Select Sector’s investing definition of each economic sector, along with the associated industry breakdown.

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Study Notes:

Let’s take a tour of SPDR Select Sector’s investing definition of each economic sector, along with the associated industry breakdown.

Consumer Staples invests in companies that are primarily involved in the development and production of consumer products that cover food and drug retailing, beverages, food products, tobacco, household products, and personal products. There are 33 companies in the Consumer Staples Select Sector SPDR. Consumer Staples has two equally-weighted industries accounting for about half of the sector – Beverages and Household Products. Other large components are Foods & Staples retailing and Food Products. Tobacco and Personal Products make-up the rest of the consumer staples sector.

Healthcare consists of companies whose primary business may include health care equipment and supplies, health care services, biotechnology, and pharmaceuticals. There are 62 companies in the Health Care Select Sector SPDR. Around one-third of the sector is made-up of Pharmaceuticals companies, while one-quarter is comprised of Health Care Equipment & Supplies. Further down the channel comes Health Care Providers & Services followed by Biotechnology, Life Sciences Tools & Services and finally Health Care Technology.

Real Estate is composed of companies primarily involved in the following industries: Real Estate Management & Development and REITs, excluding Mortgage REITs. There are 32 companies in the Real Estate Select Sector SPDR. Real Estate Investment Trusts or REITs form almost 98% of this sector with Management & Development companies topping up the balance.

Communications is composed of companies primarily involved in modern communication activities and information delivery. Industries include Telecommunications, Media, Wireless, Entertainment and Internet Media. There are 26 companies in the Communications Services Select Sector SPDR. Communications may be broken down into Interactive Media and Services, Media, Entertainment and Diversified Telecom Services.

Energy invests in companies that primarily develop and produce crude oil and natural gas and provide drilling and other energy-related services. There are 29 companies in the Energy Select Sector SPDR. The Energy sector is broken into Oil, Gas & Consumable Fuels (90%) and Energy Equipment Services (10%). Industrials invests in a wide array of industrial companies. Industries in this SPDR include aerospace and defense, building products, construction and engineering, electrical equipment, conglomerates, machinery, commercial services and supplies. There are 69 companies in the Industrial Select Sector SPDR. Here, the list of industries within the Industrials sector is lengthy with the heavyweights of Aerospace & Defense, Machinery and Industrial Conglomerates forming more than 60% of the sector. The smallest component is Construction and Engineering where members account for less than 1% of the sector.

Technology is composed of companies primarily involved in such industries as software and services, IT consulting services, semiconductor equipment, computer and peripherals. There are 68 companies in the Technology Select Sector SPDR. Here six industries comprise the sector including Software, IT Services, Technology Hardware Storage & Peripherals and Semiconductor and Semiconductor Equipment.

Consumer Discretionary invests in industries such as automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, and retailing. There are 63 companies in the Consumer Discretionary Select Sector SPDR. The largest industries represented here are Internet and Marketing Retail, Specialty Retail and Hotels, Restaurants and Leisure.

Financials invests in a wide array of financial service firms with diversified business lines ranging from investment management to commercial and investment banking. There are 67 companies in the Financial Select Sector SPDR. Banks, Capital Markets and Insurance industries represent more than 80% of this sector.

Materials is composed of companies primarily involved in such industries as chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products. There are 28 companies in the Materials Select Sector SPDR. The Chemicals industry is the major heavyweight in the sector at more than 70%. Containers & Packing is the next major industry.

Utilities invests primarily in companies that produce, generate, transmit or distribute electricity or natural gas. There are 28 companies in the Utilities Select Sector SPDR. Electric Utilities form the major industrial group within Utilities, while Multi Utilities is only half its weighting. Water, Independents and Gas Utilities are very small in comparison.

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