Stocks and Their Sector

[cpatte7372]

Hi All,

Can someone recommend how close one should track/compare a stock with its sector.

For example, the industry screener on CBS MarketWatch suggests that IBM is within the computer industry ($DJUSCR), so when I place IBM on my chart I would also place ($DJUSCR) on the same chart. However, the broader sector is Technology Hardware & Equipment (see link for details) which is within an even broader market still - Technology.

My question, therefore is should I what should I compare IBM to in this particular case? Technology, Technology Hardware & Equipment or Computers?


Cheers

Carlton

http://cbs.marketwatch.com/tools/industry/stockchart.asp?bcind_ind=bc_top&bcind_period=3mo&bcind_symb_change=IBM

[cpatte7372]

Sorry for the poor use of grammar.

What I was trying to was, should I compare, (in this particular case) IBM to Technology, Technology Hardware & Equipment or Computers?

Please see link below.

Cheers

Carlton

[MR]

Cannot answer this question to its specifics but, in general, it never hurts to compare individual stocks with overall sector analysis. You will usually find a pattern somewhere that helps enlighten one to things like mutual fund money flowing in and out of a sector. It is like the tide. The tide raises/lowers all boats, big and small. Comparing sectors to individual stocks help.

[soylent]

Hi Carlton --

IBM could be in all those. When you are dealing with monoliths (GE, IBM, MSFT, ...) sectors become less relevant.

Mose those big-boys run in channels and follow the overall market in nice oscillations...

I may have mentioned before -- review IBD. Nice guide to the sectors...

-c

[cpatte7372]

Thanks for the feedback guys.


Soylent, I guess IBM was a bad example as I agree that giants like IBM, GE, etc.. move the markets all by themselves. But in general, when following some of the lesser known stocks I'm still a little confused how deep (so to speak) should I assess a stock with its sector. i.e., should I compare a stock to its immediate sector or its overall sector?

If you remember I checked out IBD and I concur that their sector analysis is great, however their subscription is a little too expensive for me at this stage.


Cheers

Carlton

[DuaneG]

Hi Carlton,

It really depends on what you are trying to analyze. Getting specific with a stocks immediate sector will give you more of a micro view of how the stocks within that sector are performing as a group. When you look at an overall industry group, you are getting a macro view of how all the sectors within that industry groups are performing. By comparing to an entire industry group, you are getting a somewhat diluted view of performance, but it remains an important part of fundamental analysis nonetheless.

[cpatte7372]

Duane,

Thanks for the feedback. Can you therefore tell me what do professional traders do? Do they usual stand back and compare a stock movement in relation to its overall industry or they generally look at a stock from a more micro view?

I know each trader has his/her own way of comparing stocks, I'm just wondering what is common among professional traders.

Cheers

Carlton

[DuaneG]

Carlton,

Most professional traders that I have worked with tend to prefer the Sector to the Industry Group. While most professional traders, are focused on the short term, the investment banks and long term holders will also account for the industry groups when performing their analysis. As with most aspects of trading, it all comes down to time frame, objectives, and trading style.