The investment industry’s Global Industry Classification Standard, GICS, was created in 1999 by MSCI Inc. (ticker: MSCI) and S&P Global Inc. (SPGI). The idea was to standardize industrial and economic sector classifications and make it easier for investors to compare companies and evaluate securities. The GICS enjoyed wide acceptance and rapid adoption on Wall Street and around the world.
The GICS system allows retail and institutional investors to quickly and accurately categorize companies. This helps people understand, in general terms, what kinds of businesses they are investing in and how their holdings relate to the economy and the broader market.
The GICS organized companies into 11 sectors:
- Communication services
- Consumer discretionary
- Consumer staples
- Energy
- Financials
- Health care
- Industrials
- Information technology (IT)
- Materials
- Real Estate
- Utilities
An important function of the GICS is to facilitate proper diversification. Equity investing involves risk and diversification is one of the best risk mitigation strategies. No one can precisely predict the movement of the markets or the performance of stocks. It’s smart to spread out your investment capital by holding several stocks covering several sectors.
Some investors design equity portfolios to include at least one stock from each of the 11 GICS sectors. That might sound like a good idea, but with more than 6,000 stocks trading on the major U.S. exchanges – each assigned to one of the 11 sectors – choosing the top stocks from each sector can be a difficult task. This updated list of 11 high-quality stocks from each of the 11 sectors should be a good starting point for you to begin your research:
T-Mobile US Inc. (TMUS)
Sector: Communication services
Industry: Telecom services
T-Mobile US is a mobile communications company with a market cap of $270 billion. It provides cellular and digital wireless communications equipment and related services that include voice, data, video and messaging. The company has more than 127 million subscribers in the U.S., the U.S. Virgin Islands and Puerto Rico.
The business sells smartphones, Wi-Fi equipment, tablets, wearable devices and accessories. It also provides nationwide cellular coverage to keep all the devices connected. The company distributes its products and services online and through company-owned stores. It also maintains an extensive network of third-party, independent retail outlets that generate significant revenue for the firm.
In addition to telecom services, TMUS has a financial segment that provides financing, insurance plans and extended warranties to its customers. The stock has a current dividend yield of 1.5%.
Lowe’s Cos. Inc. (LOW)
Sector: Consumer discretionary
Industry: Home improvement retail
Lowe’s is a 103-year-old company that began as a small, one-location hardware store in rural North Carolina. Today the company is a $150 billion powerhouse in the home improvement industry.
The business operates more than 1,700 big-box retail outlets in population centers all over the U.S. Its warehouse-style stores offer just about anything a homeowner or contractor could need to build or maintain a home. It sells lumber, materials, tools, power equipment, cleaning supplies, small and large appliances, gardening equipment, and much more.
Because home buying and rehab projects are often tied to mortgage rates, the home improvement retail industry is sensitive to fluctuations in the interest rate market. After a prolonged period of increases, rates finally seem to be moderating and may be heading lower soon. That would be good news for LOW.
LOW pays a current forward annual dividend of $4.60 a share, which works out to a dividend yield of 1.7%.
Coca-Cola Co. (KO)
Sector: Consumer staples
Industry: Non-alcoholic beverages
Coca-Cola is an iconic American brand, and the business behind it is probably the most famous non-alcoholic beverage company on earth.
In addition to its flagship brand Coke, the company owns Diet Coke, Sprite, Fanta, Powerade, Minute Maid and several other powerful brands. KO sells sodas, sports drinks and bottled water to billions of people in developed and emerging markets around the globe.
KO is a mature blue-chip stock that after more than 130 years in business is still growing its product line and expanding into new markets. It’s a dividend growth stock as well. The company’s board of directors has increased the stock’s annual dividend for 62 consecutive years. The current dividend yield is 3%.
Exxon Mobil Corp. (XOM)
Sector: Energy
Industry: Oil and gas (consolidated)
With a market cap approaching $490 billion, XOM is one of the biggest publicly traded stocks in the energy sector.
The company operates across all segments of the traditional hydrocarbon energy industry with special emphasis on exploration, production and distribution of oil and natural gas products. It also manufactures numerous chemicals and ancillary products derived from the crude oil and gas it produces.
Beyond fossil fuels, XOM is branching out into renewable energy sources including solar, wind power and the development of zero-emission hydrogen fuel cells.
Income investors appreciate the company’s strong dividend history and its commitment to shareholder value. The stock pays a forward annual dividend of $3.96 a share and has a current yield of just over 3.5%.
Allstate Corp. (ALL)
Sector: Financials
Industry: Insurance
ALL is a leader in the property and casualty, or P&C, segment of the insurance industry. The stock boasts a market capitalization of more than $51 billion and consistently generates over $16 billion a quarter in revenues.
Most consumers know ALL as a home and auto insurance provider, but the company is involved in many aspects of the P&C and health insurance businesses. It underwrites policies that protect electronic equipment, furniture, home appliances and more. The company even insures companies against data loss.
Wall Street is generally bullish on ALL. Morgan Stanley has an “overweight” rating on the stock, while Goldman Sachs and Jefferies both rate the stock a “buy.”
ALL is currently yielding 1.9%.
Pfizer Inc. (PFE)
Sector: Health care
Industry: Drug development
PFE is a premier player in the drug and biopharmaceutical segment of the health care sector. This New York-based company has a market cap of $145 billion. Income investors will be happy to know that the stock has a dividend yield of 6.6%.
PFE has an impressive portfolio of drugs, vaccines and medical treatments already on the market, but the future growth of the company lies in its extensive pipeline of drugs that are in various stages of development, testing and the Food and Drug Administration approval process.
The company’s products are sold by its proprietary sales force and a well-established distribution network that it has cultivated over 175 years in business.
Caterpillar Inc. (CAT)
Sector: Industrials
Industry: Heavy machinery
CAT is a heavy equipment company. It designs, manufactures and sells industrial marine vessels, dump trucks, bulldozers, backhoes, locomotives, mining equipment, electric and diesel turbine engines and many other heavy-duty vehicles.
In addition to building and selling power equipment, CAT has a financial segment that provides loans and creative financing to dealerships and customers. In the third quarter of 2024 the financial division generated $888 million in revenue for the firm. That represents 5.5% of the $16.1 billion CAT reported for that quarter.
CAT is a long-standing member of the S&P Dividend Aristocrats Index. The company has raised its annual dividend for 30 consecutive years. The current dividend yield stands at 1.5%.
Microsoft Corp. (MSFT)
Sector: Information technology (IT)
Industry: Software
MSFT has been a premier global IT company for almost 50 years. With a market cap topping $3.3 trillion, this company is more than a large-cap stock, it’s one of the few publicly traded stocks that can truly be called a mega-cap.
MSFT designs and builds industry-leading hardware, software and semiconductors. And, thanks to its popular Xbox platform, it’s also one of the world’s leading electronic gaming companies.
The company’s Microsoft Office software is used by more than 1.4 billion individuals and businesses worldwide. It’s one of the most successful subscription-based enterprise software suites in the world.
MSFT enjoys a reputation for innovation. That’s why it was no surprise to the IT industry when, in April 2023, the company announced its Athena initiative. The Athena project is focused on developing the next generation of artificial intelligence microchips to directly compete with Nvidia Corp. (NVDA).
Freeport-McMoRan Inc. (FCX)
Sector: Materials
Industry: Copper
FCX is one of the first stocks that comes to mind when investors think about the materials sector. FCX is a $61 billion minerals and mining company prominent in the exploration and production of copper.
The company’s flagship property is the Grasberg mine in Indonesia, an asset that’s proving to be one of the most productive copper and gold mines ever developed. In addition to Indonesia, FCX is also active in many areas in of North and South America.
FCX was founded in 1912. Over the last 112 years, the company has shown remarkable resilience and produced a strong track record of success through good economic times and bad. FCX is well-positioned to continue meeting the challenges of the industrial and precious metals industry. The stock has a current dividend yield of 1.4%.
American Tower Corp. (AMT)
Sector: Real estate
Industry: Specialty real estate
As a $93 billion real estate investment trust (REIT), AMT is one of the world’s largest global REITs specializing in digital infrastructure real estate. The company operates a portfolio of more than 200,000 wireless broadcast towers all over the U.S. as well as several strategically located data centers.
AMT maintains a strategic approach to growth. It expands its footprint only through highly selective acquisitions in domestic and international markets while focusing on innovation and state-of-the-art technology.
Wall Street expects AMT to grow earnings per share by 28% in its 2025 fiscal year. AMT pays a current dividend yield of 3.3%.
Consolidated Edison Inc. (ED)
Sector: Utilities
Industry: Gas and Electric
ED is a regulated gas and electric utility servicing homes and businesses in New York City, Westchester County, New York, and parts of Northern New Jersey. ED is an original blue-chip company that was founded more than 130 years ago in 1893.
The company has about 3.7 million electricity customers, about 1.1 million natural gas customers and a small number – less than 2,000 – steam power customers. Those customers will combine to generate an estimated $15 billion in revenue for the company in 2024 and $16 billion in 2025, a year-over-year increase of 6.7%
The company had invested in green energy projects including solar and wind facilities, but it sold off its clean energy business to focus on improving its pipeline network and other infrastructure.
ED stock currently pays a 3.6% dividend yield.