Stock sectors are categories of businesses grouped by factors such as market, products, services and so on. Often when economic conditions favor certain parts of the economy, companies in that particular sector prosper.
Stock sectors allow you to compare industries sector-to-sector, but they are also helpful in providing a basis for evaluating how well a company is performing relative to its sector.
Stock investors can choose individual companies in the sector or buy a variety of products that cover all or part of the sector (exchange traded funds or mutual funds, for example).
It is difficult to predict which sectors are going to become more active in advance, however with some research and common sense, you can find some clues. For example, what are interest rates doing (rising, fall, flat)? Industries that are interest-rate sensitive will respond accordingly.
Some industries seem to do well more often than others, however, even if a sector is growing, that does not mean every company in that sector is prospering.
If you want to play the sector game, you need to identify the market leaders because these are the companies that will push sector performance up or down.
Small, innovative companies may offer a better chance for large gains, but they come with the higher risk of failure. Even if they succeed, small companies seldom drive the performance of whole sectors.
You can find comparative information on stock sectors at Morningstar.com.
Note that Morningstar uses one set of stock sectors, while others may use a different set that may be more expanded. It is less important which service you use to follow sectors than making sure you don't jump from list to list because the lists may not use the same criteria.
