Where To Invest: Sector Strategies

The best sectors to invest in are always changing as the economy and stock market evolve. Analysts have historically favoured tech, but the industrial and materials sectors are also popular.

Some sources suggest that the gig economy is a good bet, with companies like Uber, Airbnb and DoorDash experiencing success in the post-pandemic world.

Other sources suggest healthcare, computer technology, and business services are good sectors to invest in.

It's important to remember that past performance doesn't guarantee future success, and investors should always diversify their portfolios to avoid major losses.

Healthcare and biotechnology

The healthcare and biotechnology industries have seen an impressive rise in technological advancements in recent years, making them attractive sectors for investment.

The healthcare sector covers several branches, including hospital conglomerates, institutional services, medical instrument makers, and biomedical companies. The demand for healthcare services is constant, regardless of the economic situation, and it has been the top investment sector for the past decade.

Biotechnology companies, in particular, have significant growth potential as they develop new drugs and therapies to treat a range of diseases. The COVID-19 pandemic has also created massive opportunities for biotech companies developing treatments and vaccines.

Some biotech companies to watch include Axsome Therapeutics, Exelixis, Intellia Therapeutics, Regeneron Pharmaceuticals, and Vertex Pharmaceuticals. These companies have strong pipelines and market-winning drugs, making them promising investment prospects.

Investing in biotech stocks does come with risks, as clinical trials and regulatory approval processes can be time-consuming and costly. However, the potential for innovation and growth in the healthcare and biotechnology sectors makes them attractive options for investors.

Computer and technology

The computer and technology sector, also known as the information technology sector, has been pivotal in driving the world towards the Information Age. This sector is comprised of two main stock categories: technological product manufacturers and technological service industry companies.

The technology sector is vast, encompassing gadget makers, software developers, wireless providers, streaming services, semiconductor companies, and cloud computing providers, to name a few. Any company that sells a product or service heavily infused with technology likely falls within this sector.

Tech stocks can be risky, but there are ways to mitigate this risk. For instance, investing in an exchange-traded fund (ETF) that focuses on tech stocks can help avoid common mistakes. The Ark Innovation ETF (ARKK) is one such option, although it may ultimately prove riskier than investing in the tech giants. Another strategy is to only invest when you feel confident that a company's growth prospects justify its valuation.

• Amazon.com (AMZN) is the leading online retailer and provider of cloud computing infrastructure.
• Microsoft (MSFT) is a dominant software company known for its Windows operating system and Office productivity software. It is also the second-largest provider of cloud infrastructure.
• Apple (AAPL) manufactures the iPhone, iPad, and Mac computers. It benefits from intense customer loyalty and a growing array of services that make its ecosystem sticky.
• Intel (INTC) is one of the largest semiconductor companies in the world, designing and manufacturing central processing units (CPUs) and specialty chips for artificial intelligence.
• Netflix (NFLX) is the top dog in the video streaming industry, spending billions of dollars each year on content to keep subscribers hooked.
• Meta Platforms (META), formerly known as Facebook, is the largest social media company with over 2 billion daily active users across its platforms. It is betting big on virtual reality and the metaverse.
• Alphabet (GOOG) (GOOGL) is the parent company of online search giant Google and the Android operating system for smartphones. Its Google Cloud business is growing rapidly.

Business services

The business services sector is a broad and diverse field that provides support to businesses across various industries. It includes companies that offer services such as office administration, hiring and personnel placement, security, travel arrangements, cleaning, and waste disposal. This sector is driven by technology, digitalization, and advancements in communication technologies and infrastructure, giving rise to innovative, flexible, and sustainable business solutions.

The business services sector is particularly prominent in Europe and North America, with the US market consisting of approximately 420,000 establishments, generating a combined annual revenue of about $950 billion. This sector includes well-known companies such as ADP, Allegis Group, ManpowerGroup, and Waste Management in the US, as well as Adecco in Switzerland, Randstad in the Netherlands, and TUI Group in Germany.

One notable segment within the business services sector is financial services, which play a crucial role in the economy. Financial services encompass a wide range of activities, including banking, investing, insurance, mortgages, credit cards, payment services, tax preparation, and accounting. They facilitate the flow of capital and liquidity in the marketplace, and a strong financial services sector contributes to economic growth and the prosperity of a nation's population.

The gig economy, accelerated by the pandemic, has also influenced the business services sector. Companies like Fiverr International, DoorDash, Airbnb, Uber, and Upwork have gained traction by offering services such as food delivery, accommodation, transportation, and freelance work.

When investing in the business services sector, it is important to consider the competitive landscape. Many business services can be provided in-house, leading to intense competition, especially among small companies that compete with larger, more established businesses. However, the sector offers a wide range of investment opportunities, from large conglomerates to smaller, specialised firms.

Consumer discretionary

The consumer discretionary sector includes businesses that sell non-essential goods and services, such as:

• Vacation and leisure activities
• Furniture and appliances
• Cars
• Household appliances
• Specialty items
• Luxury goods

Some well-known companies in the consumer discretionary sector include:

• Disney
• McDonald's
• Nike
• Starbucks
• La-Z-Boy
• Whirlpool
• Carnival Corp.
• Tesla

The consumer discretionary sector is sensitive to economic cycles, and companies' sales can be unpredictable due to fluctuating consumer demand. However, many consumer discretionary companies perform well during bull markets, especially when interest rates are low.

When considering investing in the consumer discretionary sector, it is important to keep in mind the potential impact of economic conditions on consumer spending. Additionally, it is worth noting that this sector includes a range of industries, from hotels and restaurants to automotive and retail.

FMCG

Fast-moving consumer goods (FMCG), also known as consumer packaged goods (CPG), are products that are sold quickly, at a relatively low cost, and are in high demand. Examples include non-durable household goods such as packaged foods, beverages, toiletries, cosmetics, over-the-counter drugs, and other consumables. FMCG has a high inventory turnover and is contrasted with specialty items, which have lower sales and higher carrying charges.

The FMCG industry is massive, ever-evolving, and is characterised by fierce market competition, high volumes, and heavy investments in marketing. The largest FMCG companies by revenue are among the best known, such as Nestle, PepsiCo, and Procter and Gamble.

The FMCG sector is one of the most active sectors in the world. It deals with the production of daily-use products, such as detergents, batteries, cosmetics, soaps, and toiletries. The sector produces products in large quantities to compensate for the low-profit margins. It is also influenced by discounts offered by stores, holidays, and other seasonal periods.

The FMCG sector offers a wide variety of career opportunities, including sales, marketing, information services, finance, research and development, and human resources.

Frequently asked questions