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magazineFocus on sector data to get the investing edge
The majority of stock market commentary in the mainstream media focuses on the performance of the FTSE 100 or the FTSE All-Share. In order to better understand what’s going on, we believe it is worth drilling down to the sector level to see which industries are faring well and which are struggling.
Our analysis finds a very wide spread between the best and worst performing sectors among the 350 biggest companies on the UK Main Market, illustrating why it pays to study markets more closely when seeking investment opportunities.
We’ve studied the FTSE 350 sector data on SharePad’s screening system. Industrial Metals is revealed to be the best performing sector, up 56.5% so far this year. In contrast, the worst sector is Oil Equipment, Services and Distribution which is down 34% year to date.
It’s worth putting those figures in context of the wider market. The FTSE All-Share is up 5.1%. That index is considered by many people to represent the market as a whole as it consists of all the companies in the FTSE 100, FTSE 250 and FTSE Small Cap index, adding up to 638 stocks in total.
The FTSE 350 index is up 4.9% so far in 2017. The FTSE 250 index is up 9.1% and the FTSE 100 is 4.1% ahead.
The Industrial Metals sector will have benefited from a recovery in commodity prices and efforts over the past few years among mining companies to strip out costs and have leaner operations.
On closer inspection, we see that the sector only contains two constituents, being aluminium specialist Evraz (EVR) which is up 33%; and iron ore producer Ferrexpo (FXPO) whose share price is up 118% year to date.
There are a few other sectors whose performance isn’t really indicative of a broad selection of companies – merely the fortunes of a handful. The FTSE 350 Forestry & Paper sector only has a single member, being Mondi (MNDI). So when you see 27.1% sector gain year to date, you know that’s only the share price performance of Mondi.
Most industries on the stock market have a much broader range of companies whose collective performance dictates sector gains or losses.
For example, the FTSE 350 General Retailers sector currently has 17 constituents. The sector overall is down 7.3% so far this year. Within that group, the best performer is N Brown (BWNG) with a 43.6% gain; and the worst performer is Dixons Carphone (DC.) with a 47.5% loss.
We plan to launch a new series later this year analysing sectors so you can better understand how industries work, which companies on the market operate in certain areas and the stocks, funds, investment trusts and exchange-traded funds to gain exposure.
Important information:
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
