Sectors and industries: how stocks are classified with GICS, SIC and NAICS
Sectors are broad groups of companies and industries are narrower groups within them. Learn how GICS, SEC SIC codes and NAICS classify stocks and why it matters.
Key takeaways
- The Global Industry Classification Standard (GICS) groups companies into 11 sectors, 25 industry groups, 74 industries and 163 sub-industries, and is the system behind most index and fund sector labels.
- The SEC assigns every EDGAR filer a four-digit Standard Industrial Classification (SIC) code, which is why a company's sector on a filing can differ from its sector in an index.
- Sectors are often grouped as cyclical (such as Consumer Discretionary, Industrials and Materials) or defensive (such as Consumer Staples, Utilities and Health Care) based on how sensitive their earnings are to the economy.
- Classification systems are revised over time; in 2023 GICS moved transaction and payment processing companies from Information Technology to Financials.
- Comparing a company with peers in the same industry, not just the same sector, gives more meaningful valuation and growth comparisons.
A sector is a broad group of companies that share a primary line of business, such as Health Care or Energy, and an industry is a narrower group within a sector, such as Biotechnology or Oil and Gas Exploration and Production. Most investors encounter sectors through the Global Industry Classification Standard (GICS), which divides the market into 11 sectors, while the SEC tags each filer with a Standard Industrial Classification (SIC) code. Knowing how a company is classified helps you pick the right peers, read sector news, and understand why groups of stocks move together.
What are the 11 GICS sectors?
GICS was developed by MSCI and S&P Dow Jones Indices and is used by many index providers, fund managers and data vendors. It has four levels: 11 sectors, 25 industry groups, 74 industries and 163 sub-industries. Each company is assigned to one sub-industry based mainly on its principal source of revenue.
| GICS sector | Example industries | Typical characteristics |
|---|---|---|
| Energy | Oil, gas and consumable fuels; energy equipment and services | Earnings tied to commodity prices |
| Materials | Chemicals, metals and mining, construction materials, packaging | Cyclical, commodity-linked |
| Industrials | Aerospace and defense, machinery, airlines, building products | Cyclical, tied to capital spending |
| Consumer Discretionary | Automobiles, retail, hotels and restaurants, household durables | Sensitive to consumer confidence and spending |
| Consumer Staples | Food, beverages, household products, food retail | Defensive, steady demand |
| Health Care | Pharmaceuticals, biotechnology, medical devices, health care providers | Mix of defensive large caps and volatile small biotechs |
| Financials | Banks, insurance, capital markets, financial services | Sensitive to interest rates and credit |
| Information Technology | Software, semiconductors, technology hardware | Growth-oriented, rate sensitive valuations |
| Communication Services | Telecom, media, entertainment, interactive media | Mix of utility-like telecoms and growth media |
| Utilities | Electric, gas and water utilities, independent power producers | Defensive, regulated, rate sensitive |
| Real Estate | Equity REITs, real estate management and development | Income-oriented, rate sensitive |
GICS is revised periodically. Real Estate became a separate sector in 2016, Communication Services replaced Telecommunication Services in 2018, and changes effective in 2023 moved transaction and payment processing services from Information Technology to Financials, among other updates. When a big company is reclassified, sector index weights and sector fund holdings shift with it.
Sector vs industry vs sub-industry
The levels nest inside each other. Using GICS as the example:
| Level | Count | Example path |
|---|---|---|
| Sector | 11 | Health Care |
| Industry group | 25 | Pharmaceuticals, Biotechnology and Life Sciences |
| Industry | 74 | Biotechnology |
| Sub-industry | 163 | Biotechnology |
For peer comparison, the industry or sub-industry level is usually the useful one. A large pharmaceutical company and a clinical-stage biotech are both in Health Care, but their revenue, risk and valuation have little in common. A clinical-stage biotech's key events are trial readouts and FDA decisions, covered in the FDA approval process guide.
SIC codes: the SEC's classification
The SEC assigns each company in EDGAR a four-digit Standard Industrial Classification (SIC) code, shown on the company's EDGAR page and in the header of its filings. SIC dates from the 1930s and was replaced for US government statistics by NAICS in 1997, but the SEC still uses SIC codes to route filings to review offices in its Division of Corporation Finance.
Examples of SIC codes:
| SIC code | Description |
|---|---|
| 2834 | Pharmaceutical preparations |
| 2836 | Biological products, except diagnostic substances |
| 3674 | Semiconductors and related devices |
| 6022 | State commercial banks |
| 7372 | Prepackaged software |
Because SIC codes are older and are not updated as often as company businesses change, a company's SIC code can look outdated. That is one reason the industry shown on an SEC filing can differ from the one shown by an index provider or data site. Browsing EDGAR by SIC code is a quick way to find companies in a niche; see how to read SEC filings for more on EDGAR.
NAICS and other systems
- NAICS (North American Industry Classification System): a six-digit code system used by US, Canadian and Mexican statistical agencies for economic data. It classifies business establishments, not stocks, and is common in government data and contracting.
- ICB (Industry Classification Benchmark): a system maintained by FTSE Russell, used by several global index families. Its top level has 11 industries.
- Proprietary systems: many data providers and brokers build their own sector taxonomies, which is why the same stock can appear in different sectors on different sites.
Cyclical vs defensive sectors
Sectors respond differently to the economic cycle, interest rates and inflation. These are general tendencies, not rules:
| Group | Sectors usually included | Why |
|---|---|---|
| Cyclical | Consumer Discretionary, Industrials, Materials, Energy, Financials | Demand and earnings rise and fall with economic growth |
| Defensive | Consumer Staples, Utilities, Health Care | Demand for essentials is relatively steady |
| Rate sensitive | Utilities, Real Estate, long-duration growth stocks | Higher rates raise financing costs and lower the value of distant cash flows |
| Commodity linked | Energy, Materials | Earnings follow commodity prices |
Sector rotation is the shift of investor money between sectors as views on growth, inflation and rates change. Earnings season often drives rotation, as results from early reporters set expectations for peers; see the earnings season calendar guide.
Why classification matters for news
- Read-through moves. News from one company often moves peers in the same industry. A strong report from a large semiconductor company can lift other chip stocks; an FDA safety action on one drug can hit others with the same mechanism.
- Index and fund flows. Sector funds and sector-weighted indexes buy and sell based on classification, so a reclassification can trigger flows unrelated to fundamentals.
- Valuation context. A price-to-earnings ratio of 30 might be low for a high-growth software company and high for a utility. Comparisons only make sense within an industry.
- Regulatory exposure. Some industries face specific regulators: banks (bank regulators), drug makers (FDA), utilities (state public utility commissions), which shapes what kind of news moves them.
Worked example: Acme Corp (ticker ACME)
Hypothetical Acme Corp makes industrial sensors. Half of its revenue comes from factory automation hardware and half from monitoring software sold by subscription.
| Source | How Acme might be classified |
|---|---|
| GICS | Industrials sector, Electrical Equipment industry, if hardware is judged the principal revenue source |
| SEC SIC code | 3829, measuring and controlling devices, assigned when Acme first registered |
| A data vendor's proprietary system | Technology, based on its software growth |
If Acme's software revenue grows to 70% of the total, GICS may eventually reclassify it into Information Technology. That would move Acme into a different sector index, change which sector funds hold it, and change the peer group analysts use to value it. Its SIC code on EDGAR might not change at all. When comparing Acme with peers, using companies with a similar revenue mix gives a more meaningful comparison than using every company in either sector.
How to explore sectors and industries on Quantisnow
- Browse companies by sector on the sectors page and by narrower group on the industry page.
- Use compare to put peers side by side, and the companies directory to find tickers.
- Trending stocks and market cap rankings show which names in a sector are drawing attention.
- Each company page, at the pattern /company/AAPL, shows its classification next to its news and filings.
FAQ
How many stock market sectors are there?
Under the Global Industry Classification Standard (GICS), there are 11 sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Communication Services, Utilities and Real Estate.
What is the difference between a sector and an industry?
A sector is a broad grouping of companies with related businesses, such as Health Care. An industry is a narrower group within a sector, such as Biotechnology or Medical Devices, and is usually the better level for comparing peers.
What is a SIC code?
A SIC code is a four-digit Standard Industrial Classification code the SEC assigns to each company in EDGAR. The SEC uses it to route filings for review, and it can differ from the sector an index provider assigns.
Why is the same stock in different sectors on different websites?
Index providers, the SEC and data vendors use different classification systems (GICS, SIC, ICB or proprietary taxonomies) and update them on different schedules. Companies with several business lines are the most likely to be classified inconsistently.
What are defensive sectors?
Defensive sectors are those whose earnings tend to hold up during economic slowdowns because demand is steady, typically Consumer Staples, Utilities and Health Care. The label describes a historical tendency, not a guarantee.