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What Is GICS?

The financial sector in Canada includes companies that provide financial services such as banking, insurance, and investment management. This sector is the largest in Canada by market capitalization and includes some of the country’s largest and most well-known banks such as Royal Bank of Canada (RBC), Toronto-Dominion Bank (TD), and Bank of Nova Scotia (Scotiabank).

The Energy sector includes companies involved in the exploration, production, and distribution of oil and natural gas. Some of the largest companies in this sector include Canadian Natural Resources Limited (CNRL) and Suncor Energy Inc.

The Materials sector includes companies involved in the production of raw materials such as metals, minerals, and chemicals. Some of the largest companies in this sector include Barrick Gold Corporation and Potash Corporation of Saskatchewan Inc.

The Healthcare sector includes companies involved in the research, development, and production of healthcare products and services. Some of the largest companies in this sector include Valeant Pharmaceuticals International, Inc. and Canadian Medical Protective Association.

The Consumer Discretionary sector includes companies that provide non-essential goods and services such as automobiles, clothing, and media. Some of the largest companies in this sector include Brookfield Renewable Partners L.P. and Canadian Tire Corporation, Limited.

It’s worth noting that these are just a few examples, and there are many other companies within each sector that contribute to their overall market capitalization. Additionally, it’s also worth noting that the market capitalization of companies can change over time based on their financial performance, which can cause the relative size of sectors to change as well.

What Is GICS?

GICS stands for Global Industry Classification Standard and it is a system for classifying companies based on their primary business activities. The GICS structure consists of 11 sectors, 24 industry groups, 68 industries, and 157 sub-industries.

In Canada, the top GICS sectors by market capitalization are:

  • Financials
  • Energy
  • Materials
  • Healthcare
  • Consumer Discretionary
  • Communication Services
  • Utilities
  • Industrials
  • Information Technology
  • Consumer Staples

It’s worth noting that the GICS classification and relative size of sectors may change over time based on market conditions and the performance of individual companies.

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About GICS

The GICS system is designed to help investors and analysts understand the business activities of companies and how they are related to one another. The 11 sectors in GICS are: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Communication Services, Utilities, and Real Estate.

Each of these sectors is then divided into several industry groups, which are then divided into industries and sub-industries. For example, the Energy sector is divided into the industry groups of Exploration & Production, Integrated Oil & Gas, and Oil & Gas Refining & Marketing. Each industry group is then divided into industries, such as the Exploration & Production industry group is divided into the industries of Independent E&P and Oil & Gas Drilling.

Finally, each industry is divided into sub-industries, such as the Independent E&P industry is divided into the sub-industries of North American E&P and International E&P.

The GICS system is updated periodically to reflect changes in the economy and the business activities of companies. The last update was in 2018. It is widely used by market participants such as analysts, investors, and fund managers, to classify and evaluate companies, and to make sector and industry comparisons. Companies are also evaluated based on their revenue, market share, and other financial metrics, and are compared to companies in the same industry or sector.

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How Is GICS Useful? 

GICS is helpful in several ways:

  1. First, It provides a standardized framework for classifying companies: GICS provides a consistent and widely accepted method for classifying companies based on their business activities, which makes it easier for investors and analysts to understand and compare companies across different sectors and industries.

  2. It helps investors and analysts identify trends and opportunities: By using GICS, investors and analysts can identify trends and opportunities within specific sectors and industries, which can help them make informed investment decisions.

  3. It helps fund managers and portfolio managers diversify their portfolios: GICS helps fund managers and portfolio managers diversify their portfolios by providing a comprehensive list of sectors and industries, which can be used to identify companies that are under- or over-represented in a portfolio.

  4. It helps in Benchmarking: GICS is widely used to create benchmark indexes such as S&P 500, which are used to compare the performance of a portfolio against a given benchmark.

  5. It helps in Financial Analysis: GICS can also be used to analyze a company’s financial performance by comparing it to other companies within the same industry or sector.

In summary, GICS provides a standardized framework for classifying and evaluating companies, which helps investors and analysts make more informed investment decisions, diversify their portfolios, benchmark their performance and analyze a company’s financial performance.

Final Words

In conclusion, the Global Industry Classification Standard (GICS) is a system for classifying companies based on their primary business activities, developed by Standard & Poor’s (S&P) and MSCI. The GICS structure consists of 11 sectors, 24 industry groups, 68 industries, and 157 sub-industries. It is widely used by investors, analysts, and other market participants to classify companies and sectors in order to analyze and compare their performance.

The GICS system is designed to provide a consistent and comparable way to classify companies across different countries and regions. The GICS classification system is periodically reviewed and updated to ensure that it continues to reflect the evolving nature of the global economy and the changing business models of companies.

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