GuruFocus introduced the Industry Overview page, which allows users to get an initial overview of the best industries in which to invest, on July 24, 2015.
Despite offering a great first step in value investing, the existing feature has several drawbacks, including the shortage of information and inefficient presentation of the data. To improve this feature, we can create a summary page detailing all financial metrics for each of the industries listed.
The existing feature: its pros and cons
For each of the industries that GuruFocus covers, the current page provides the median value of each of the following financial metrics: median price-earnings (P/E) ratio, median dividend yield, median operating margin and median five-year revenue growth. Users can determine which industries have the highest margins or the lowest valuations by sorting the data table accordingly. The following article further details the Industry Overview page and its features.
The Industry Overview page benefits investors because it provides a framework that suggests good industries. Investors can click on the industry that matches their “circle of competence” and search for the best stocks within that industry. The page conveniently directs the investor to the All-in-One Screener with the chosen industry already selected as one of over 150 possible filters.
While the existing Industry Overview page presents a good start, the page still has some moderate flaws. This page only has information on a meager number of financial metrics, i.e., it lacks information on other key financial data, including the Piotroski F-score and the Altman Z-score. As discussed in earlier articles, these two financial strength scores provide deep insights about the sectors with high growth potential. Additionally, the page inefficiently presents the data in one large table and does not compare the financial metrics of a particular industry to the financial metrics of all U.S. companies trading on the New York Stock Exchange and Nasdaq.
A plan for improvement
To address some of the drawbacks highlighted above, we can present financial metric data for each of the industries in separate summary pages. Additionally, for each summary page, we can display the financial metrics for all NYSE and Nasdaq companies next to the industry-specific financial metrics. We can also list, for each of the financial metrics, how many industries have a better median value (for example, a lower P/E ratio or a higher return on equity) than the overall median value. Additionally, we can also discuss the historical range of the financial metric for each of the industries.
Over the next six weeks, we will discuss the distribution of each of the financial metrics for each industry and compare them to the distribution of the financial metric for all NYSE and Nasdaq companies. After we discuss each of the financial metrics, we can launch a feature that displays the financial metrics in well-organized pages, allowing investors to get a better overview of which industries provide good investing opportunities.
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