Sectors are based on what companies actually do. That is, unlike some standard sector classification systems, sectors aren't based on expected behavior of the stocks of these companies. This is calculated for all stock portfolios based on the securities in the most recent portfolio. For domestic-stock portfolios, this statistic shows the percentage of the domestic stock assets invested in each of the 12 sector classifications.
Companies engaged in the design and marketing of computer operating systems and applications. Examples include Microsoft, Oracle, and Siebel Systems.
Manufacturers of computer equipment, communication equipment, semiconductors, and components. Examples include IBM, Cisco Systems, and Intel.
Companies that own and operate broadcast networks and those that create content or provide it for other media companies. Examples include AOL Time Warner, Walt Disney, and Washington Post.
Companies that provide communication services using fixed-line networks or those that provide wireless access and services. Examples include SBC Communications, AT&T, and Alltel.
Includes biotechnology, pharmaceuticals, research services, HMOs, home health, hospitals, assisted living, and medical equipment and supplies. Examples include Abbott Laboratories, Merck, and Cardinal Health.
Includes retail stores, personal services, home builders, home supply, travel and entertainment companies, and educational providers. Examples include Wal-Mart, Home Depot, and Expedia.
Includes advertising, printing, publishing, business support, consultants, employment, engineering and construction, security services, waste management, distributors, and transportation. Examples include Manpower, R. H. Donnelley, and Southwest Airlines.
Includes banks, finance companies, money management firms, savings and loans, securities brokers, and insurance companies. Examples include Citigroup, Washington Mutual, and Fannie Mae.
Companies that manufacture or provide food, beverages, household and personal products, apparel, shoes, textiles, autos and auto parts, consumer electronics, luxury goods, packaging, and tobacco. Examples include PepsiCo, Ford Motor, and Kraft Foods.
Includes aerospace and defense firms, companies that provide or manufacture chemicals, machinery, building materials, and commodities. Examples include Boeing, DuPont, and Alcoa.
Companies that produce or refine oil and gas, oilfield services and equipment companies, and pipeline operators. Examples include Exxon Mobil, Schlumberger, and BP Amoco.
Electric, gas, and water utilities. Examples include Duke Energy, Exelon, and El Paso.
Portfolio diversification is generally thought of in terms of market capitalization and investment style, yet sector diversification is equally important. As demonstrated in recent years, pursuing a growth investment style via Internet stocks leads to substantially different portfolios�and results�than pursuing growth via pharmaceuticals.
Standard sector schemes, however, have several drawbacks. One is inconsistency. Most classification systems define some sectors by the types of businesses in which companies are engaged, such as technology or healthcare, and others by the expected behavior of stocks, e.g. consumer cyclical. This method also implies that cyclicality exists in only in certain sectors, and, oddly, technology isn't one of them. Finally, it�s difficult for investors to make any rational comparisons when juggling percentages for 10 or more sectors.
Morningstar is introducing a new sector structure that is more logical, allows for intelligent diversification, and makes it easier to understand the decisions being made by portfolio managers. It divides the stock universe into three major economic spheres or Super Sectors: the Information Economy, the Service Economy, and the Manufacturing Economy. Within each of these Super Sectors, four specific groups are defined for a total of 12 sectors. Industry groups and specific industries within each sector permit further analysis. It also replaces the previous structure�s �technology� classification�which included a broad range of companies with different performance trends�with separate sectors for software, hardware, and telecommunications.
The platform structure is a single, unified scheme with the Morningstar equities universe forming its base. These equities are mapped into their appropriate industries and the industries themselves are mapped into industry groups. These industry groups are then rolled into sectors. Finally the sectors are consolidated into Super Sectors.