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Review: US Stock Financial Statements for Beginners
Today is our seventh day of "Learn US financial statements".In this article, I mainly introduce: the main industry sectors of US stocks.
Those of you with investment experience will know that there are two steps to invest in stocks: selection and trading.
To put it simply, we can select high-quality stocks based on the company's financial statements, and then trade the stocks in the market to earn earnings.
So how to pick good stocks?
The answer is: we must first understand the high-quality industry; In high quality industry shares, you will greatly increase the winning probability.
Therefore, in this article today, we will mainly talk about the major industries of the U.S. stock market.
1.How many industries are represented in the US stock market?
GICS is considered to be the most reliable way to categorize US stocks. It was launched by MSCI (Morgan Stanley Capital International) and Standard & Poor's in August 1999 and is known around the world.
So, what exactly is GICS? GICS stands for "Global Industry Classification Standard".
It's a model for classifying industries, giving investors a complete globally-recognized set of definitions for industry sectors.If you find this definition a bit abstract, let's take a closer look at it.
The GICS classification system has four levels:11 economic sectors, 24 industry groups, 69 industries and 156 sub-industries.You need only keep in mind these two important points about US stock classification:
- GICS is one of the most authoritative classifications.
- According to GICS, there are 11 primary industry sectors.
What exactly are these 11 primary sectors? I've summarized them for you below:2. The most potential sectors of the US stock market
You might be wondering which of these 11 primary sectors has the most potential.
I think you should focus on the following four sectors:Information technology, energy, health care, and consumer staples.
Here's why:
1.The first sector we'll look at is information technology.
Information technology includes things like software and services, technology hardware and equipment, and semiconductors.
Why did I choose this sector?
Let's compare the two countries with the highest GDP in the world: the United States and China.
As I'm sure you know, the US currently leads the world in technology and continues to invest a lot of money in R&D in areas like the internet, AI, and semiconductors in order to maintain its lead.
At the same time, China's science and technology-focused policies, are starting to pay dividends. This is shown by the growth of its chips, electronics, and Internet industries.
In areas like electronics and semiconductors, products made in China will replace those made abroad. Overall, information technology in China is growing in a healthy way as a whole.
2.The second sector is alternative clean energy.
Because of global warming and the way the environment is getting worse, countries all over the world are working hard to develop clean alternative energy sources to replace traditional fossil fuels.
By 2030, the Chinese government wants 25% of all the energy used in the country to come from sources other than fossil fuels.
The industries that use fossil fuels will be taken apart.
Given the current incentives for clean energy and the fact that the US is back in the Paris Climate Accords, the clean energy sector has a huge amount of room to grow.
President Biden has signed an order that will give USD 500 billion every year to help equipment and vehicles that use alternative energy. It is expected that by 2030, half of all new cars sold will be electric vehicles.Moreover, installed solar power capacity is expected to grow at an average rate of 25% per year globally between 2021 and 2025.
With China's clean energy replacement strategy going into effect, the size of the global alternative energy industry is likely to grow even more.
3.Third is health care.
The health care sector is bound to experience robust growth over the next 10-20 years.
Why do I say that? I'm sure you're aware that the issue of aging populations is a serious problem in the world.
According to the National Bureau of Statistics of China, the cost of healthcare as a percentage of urban family disposable income in China rose from 6.2% in 2013 to 8.13% in 2019.
This is expected to rise further with the ongoing aging of the population in China.It is estimated that the percentage of the population over 65 years of age will exceed 20% by 2040.
Moreover, the elderly live longer these days.The number of elderly people above 80 years of age is increasing by 5% per year, and by 2040, there will be more than 74 million of them.
When people live longer, they need more health care.Additionally, the long-lasting pandemic will place a few health care companies that are focused on developing vaccines and special drugs on the fast track of development.
4.The fourth, and final, sector we'll look at is consumer staples
Consumer staples are daily necessities such as food and beverage, farm produce, as well as alcohol. Demand for consumer staples is pretty stable because we cannot do without them, whatever the economic conditions.
Given this stable demand, consumer staples are one of Warren Buffet's favorite sectors.
There are many world-famous companies in this sector, such as Coca-Cola, Heinz, and Gillette.So, besides their stability, consumer staples have also produced some of the biggest winners in the stock market.
Through the explanation of the above article, I believe you have a relatively clear understanding of the US stock industry.
Knowing the industries with the most potential in the future, stock selection becomes relatively simple ~
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