A short primer on top American stocks: Non-tech

The tech industry in America is extremely well-established and much talked about by investors throughout the world. But does that mean that the other sectors and industries are lacklustre? Definitely not. Many of the other sectors in the American stock market are also quite well-known to be good performers. 

And so, in this chapter of Smart Money, we’ll be directing our focus towards the non-tech sectors of the American stock market. Let’s start off with a brief overview of the various non-tech sectors. 

An overview of the U.S. non-tech sectors 

Standard & Poor’s (S&P) along with another American financial services company, MSCI, came up with a stock market sector classification system for the American stock market. This system came to be known as the Global Industry Classification Standard (GICS) and groups the various companies listed in the stock market into multiple relevant sectors. This categorization system continues to help investors immensely.     

As per the GICS, the U.S. stock market is classified into 11 major sectors. Here’s a quick glimpse at what they are. 

1. Healthcare
2. Financials
3. Consumer Discretionary
4. Communication Services
5. Industrials
6. Consumer Staples
7. Energy
8. Utilities
9. Real Estate
10. Materials
11. Information Technology

Since we’ve already taken a good look at the tech sector, let’s direct our focus towards the other 10. 

1. Healthcare

This sector is mainly made up of pharmaceutical companies, medical service providers, and medical equipment manufacturers. In fact, there are as many as six different industries under this sector, namely: 

• Biotechnology
• Healthcare equipment & supplies
• Healthcare providers & services
• Healthcare technology
• Life sciences tools & services
• Pharmaceuticals. 

The companies under the healthcare sector are quite mature and stable. With a total market cap of around $7.38 trillion as on March 03, 2021, the sector is the fourth largest in the American markets. 

Here’s a quick look at the top stocks to lookout for under this sector. 

a) Pfizer

Pfizer is a U.S. pharmaceutical company that has a multinational presence. With revenues of more than $47 billion, Pfizer is currently in the 64th position on the Fortune 500 list. If you’ve been keeping up with the news, as you no doubt would have in the wake of the coronavirus pandemic, the company recently rolled out a COVID-19 vaccine that has not only been extremely effective, but also been well received. 

b) Johnson & Johnson

Another U.S. multinational corporation in the healthcare sector, Johnson & Johnson is in the business of manufacturing medical equipment, pharmaceuticals, and consumer healthcare goods. 

2. Financials

This sector is composed of corporations that are in the business of banking, finance, insurance, and investments, among others. As with healthcare, the companies in the financial sector are also considered to be mature and stable. The market cap of this sector is around $7.91 trillion as on March 03, 2021, which makes it the third largest among all the 11 sectors. 

Here are the top two companies in the financial sector.

a) Bank of America

Bank of America is one of the premier financial services institutions in the U.S. In addition to being involved in the banking space, the institution doubles up as an investment bank as well. The company rakes in more than $91 billion in revenue, with its net income around $27 billion.   

b) Berkshire Hathaway

Currently led by the prolific investor Warren Buffet, Berkshire Hathaway is an investment and holding company that fully owns several corporations and holds significant amounts of stake in many others. The company’s net income alone crosses $81 billion.

3. Consumer Discretionary

The consumer discretionary sector consists of companies that manufacture or provide consumer luxury goods and services. In other words, companies that manufacture non-essential goods such as electronic devices, cars, and jewellery typically appear under this sector. With a market cap of 8.42 trillion as on March 03, 2021, this sector is the second largest among all the others.

Here’s a quick look at the top stocks in this sector.

a) Ford Motor Company

Ford Motor Company is an American multinational passenger vehicle manufacturer. The company is quite well known throughout the world for its cars and trucks. Currently, the company is also involved in the research and development of electric vehicles, making it a good future investment option. 

b) Home Depot

The largest home improvement solutions provider in America, Home Depot is involved in the business of selling equipment, tools, and construction materials. The company also has presence in Mexico, Canada, China, United Kingdom, and South America. Currently the company is ranked 26th in the Fortune 500 list.  

4. Communication Services

As the name itself implies, this sector consists of companies that provide connectivity services to the people. This includes telephone, mobile, and internet connectivity as well. In addition to that, it also consists of entertainment and media companies. With a market cap of around 6.19 trillion as on March 03, 2021, the communication services sector is currently the sixth largest among all the sectors. 

Here are a few of the top stocks under this sector. 

a) Disney

The Walt Disney Company, commonly known as just Disney, is a multinational media and entertainment company. In addition to producing movies, tv shows, and music, the company is also involved in the digital streaming services space. Disney also owns and operates studios and theme parks under its ‘Walt Disney’ brand name.

b) Verizon

Verizon is one of the U.S.’s largest telecommunications service providers. In addition to providing mobile phone and landline services, the company also offers cable television, broadband, digital television, and IPTV services, among others. 

5. Industrials

Industrials is one of the largest sectors among all the others. It consists of an extensive range of companies and includes rail companies, airlines, and even weapons manufacturers. As a matter of fact, this sector contains almost 14 different industries. However, despite this fact, the sector has a market cap of only $5.29 trillion as on March 03, 2021, putting it in the seventh position. 

Here are two of the top stocks under the industrials sector.

a) 3M

A U.S. multinational conglomerate, 3M operates under multiple industries such as construction, automotive, consumer goods, and even healthcare, among others. The products manufactured by 3M are used throughout the world for a wide range of purposes. In fact, the company is credited with manufacturing more than 60,000 different products under multiple divisions.

b) Caterpillar

Caterpillar is a heavy machinery and equipment manufacturing company. Currently, the company is the largest construction equipment manufacturer in the entire world. In addition to manufacturing, Caterpillar is involved in designing and  engineering as well.  

6. Consumer Staples

Companies in this sector are involved in the manufacture of all the products that are considered to be necessary in life. This includes household products, personal care products, and also food and beverages. The consumer staples sector has a market cap of around $4.08 trillion as on March 03, 2021, which makes it the eighth largest among all the sectors.  

Here’s a brief look at a few of the top stocks in the consumer staples category.

a) Procter & Gamble (P&G)

Procter & Gamble is one of the world’s largest manufacturers of personal care and hygiene products. In addition to that, the company is involved in the personal health segment as well. With an extensive range of brands and products, P&G is quite popular throughout the world and enjoys significant brand equity. 

b) Walmart

Walmart is among the largest retail hypermarket chains, not only in the U.S., but in the entire world. The company also owns and operates several discount departmental stores, and grocery stores. Recently, Walmart forayed into the e-commerce business in India with the acquisition of one of the major players - Flipkart. 

7. Energy

The energy sector consists of companies that are in the fossil fuel business. This includes natural gas and crude oil, among others. Companies in this sector are involved in the exploration, extraction, refinement, and transportation of the fuels. The market cap of the energy sector is around $2.57 trillion as on March 03, 2021, making it the ninth largest sector.  

Let’s take a quick look at a couple of the top stocks in this category. 

a) Chevron

One of the world’s largest energy companies, Chevron is involved in the exploration and extraction of both natural gas, crude oil, and other hydrocarbons. The company also refines, markets, and transports fossil fuels. Of late, Chevron has been investing heavily in alternative energy sources such as solar, wind, and hydrogen. 

b) ExxonMobil

Wildly similar to Chevron, ExxonMobil is also in the business of exploration and extraction of oil and gas. In the year 2018, the company was awarded the second position in the prestigious Fortune 500 list. The company operates in all the three verticals of the oil business - upstream, downstream, and midstream. 

8. Utilities

Companies that are involved in the transmission of utilities such as gas, electricity, and water to residential households and commercial buildings are categorized under this sector. The market cap of the utilities sector is quite low at just $1.46 trillion, which puts it in the last spot along with the real estate sector.

Here’s a quick look at two of the top American stocks in this sector.

a) Dominion Energy

With presence in around 16 states of the U.S.A, Dominion Energy is a premier power and energy distribution company in the country. The company distributes both natural gas and electricity. That’s not all. It is involved in the power generation business as well.

b) Duke Energy

Similar to Dominion Energy, Duke Energy is also in the utility distribution business. However, the company restricts its distribution to electricity alone. It generates millions of megawatt-hours of electricity, which it then distributes it to its 7.2 million odd customers. 

9. Real Estate

As the name itself implies, this sector contains companies that are involved in the business of construction, renting, and leasing of residential and commercial properties. Coming in at around $1.44 trillion, the market cap of this sector is nearabout the same as the utilities sector. 

Here are two of the top stocks in the Real Estate sector. 

a) American Tower

American Tower is essentially a Real Estate Investment Trust (REIT) that owns and operates broadcasting and wireless communications infrastructure throughout the world. The company currently occupies the 410th position in the Fortune 500 list.  

b) Public Storage

Another Real Estate Investment Trust based in the U.S., Public Storage owns and operates several self storage units throughout the country, Canada, and Europe. The company has more than 2,200 locations under its belt and is currently the largest self-storage company in the U.S.  

10. Materials

This sector houses companies that provide raw materials, packing materials, and other products that form a part of a production process. It includes companies that are in the business of mining metals and minerals as well. The market cap of $2.54 trillion of this sector puts it in the tenth position among the sectors list.  

Let’s take a look at two of the top stocks in the materials sector.

a) Dow

Dow is one of the most well-known manufacturers of chemicals, plastics, and agricultural products in the world. Although the company’s products are sold to end-use consumers, most of its sales are done to other chemical companies.  

b) DuPont

DuPont de Nemours is quite similar to Dow Inc. since it is also involved in the manufacture and sale of chemicals. That said, DuPont produces several speciality products for multiple industries as well.

Wrapping up

With this, we’ve finally come to the end of this chapter. Hope you’ve gotten a thorough idea of the various non-tech sectors and the top stocks within them. In the next chapter, we’ll be dealing with something even more exciting. So, till then, stay tuned!  

A quick recap

• Standard & Poor’s (S&P) along with another American financial services company, MSCI, came up with a stock market sector classification system for the American stock market. 
• This system came to be known as the Global Industry Classification Standard (GICS) and groups the various companies listed in the stock market into multiple relevant sectors. 
• As per the GICS, the U.S. stock market is classified into 11 major sectors.
• The healthcare sector is mainly made up of pharmaceutical companies, medical service providers, and medical equipment manufacturers.
• The financial sector is composed of corporations that are in the business of banking, finance, insurance, and investments, among others. 
• The consumer discretionary sector consists of companies that manufacture or provide consumer luxury goods and services. In other words, companies that manufacture non-essential goods such as electronic devices, cars, and jewellery typically appear under this sector. 
• The communications services sector consists of companies that provide connectivity services to the people. This includes telephone, mobile, and internet connectivity as well. In addition to that, it also consists of entertainment and media companies. 
• The industrials sector consists of an extensive range of companies and includes rail companies, airlines, and even weapons manufacturers. As a matter of fact, this sector contains almost 14 different industries. 
• Companies in the consumer staples sector are involved in the manufacture of all the products that are considered to be necessary in life. This includes household products, personal care products, and also food and beverages.
• The energy sector consists of companies that are in the fossil fuel business. This includes natural gas and crude oil, among others. Companies in this sector are involved in the exploration, extraction, refinement, and transportation of the fuels.
• Companies that are involved in the transmission of utilities such as gas, electricity, and water to residential households and commercial buildings are categorized under the utilities sector. 
• The real estate sector contains companies that are involved in the business of construction, renting, and leasing of residential and commercial properties.
• The materials sector houses companies that provide raw materials, packing materials, and other products that form a part of a production process.