The conventional way to classify industries is by grouping them into sectors, as the GICS standard does. I’m interested in alternative approaches. One can be found in Portfolio123’s “themes”: macro, population growth, special, financial, and innovative. You can read more about that here:
I really like this approach. But I was also wondering about alternatives. There’s a very short article on the Harvard Business Review - https://hbr.org/2016/08/why-are-we-still-classifying-companies-by-industry - that suggests we classify industries as follows:
Asset Builders make and sell physical things
Service Providers use people to offer services
Technology Creators generate and deliver intellectual property (software and data)
Network Orchestrators facilitate transactions and interactions within a network
This seems like a promising idea, but I think it might be hard to assign certain industries to one of these categories, and I don’t know how useful the classification might be. I’m also not aware of anyone who has gone to step two and actually tried to assign industries, subindustries, or individual companies to one of these four categories. I myself wouldn’t know where to begin. What category would banks be in? How about insurance companies? How about Netflix?
What I’m looking for is a way to group stocks that exhibit similar behavior based on what business they’re in that are somewhat larger than GICS sectors. Does anyone have any ideas about this? P123’s “theme” approach is great, and maybe that’s the best one available. But if anyone knows of alternatives, I’d love to hear about them.