We use the S&P sectors to sort the companies into 11 different sectors. These sectors are known as the Global Industry Classification Standard (GICS). The GICS was created in 1999 by Standard & Poor’s (S&P) and Morgan Stanley Capital International (MSCI). It is used by the majority of the professional investment management community. More than 95% of the world’s listed market capitalization has been classified by GICS.
The GICS sorts companies into sectors based on their primary business activity. Multiple factors are considered, such as a company’s main source of revenue, earnings analysis and market perception. The GICS uses a refined system to sort companies into 11 sectors. These are further divided into 24 industry groups, then into 68 industries, and finally into 157 sub-industries. For the purpose of the database, we only use the 11 fundamental sectors.
Sector - Consumer Discretionary
The discretionary consumer sector produces luxury items and services that are ‘not necessary for survival’. That is the difference between consumer discretionary (sector 4) and consumer staples (sector 7). A vast range of products and experiences fall under this category, such as cars, jewellery, electronic devices, travelling, staying at a hotel or dining at a fancy restaurant. Luxury clothing falls under consumer discretionary, whereas cosmetics and perfumes fall under consumer staples.
Examples of companies in this sector are big names like Starbucks, Amazon and Domino’s Pizza.