Forum Topics Stock sector classification
Vandelay
3 years ago

Listening to The Motley Fool podcast from thursday with Andrew, I found the topic of different stocks being lumped under the "Tech" sector basket amusing. They spoke about how Afterpay is really a credit business for example. I find sector classifications nearly pointless when looking at a potential investment and something that brokers try to push down our throats so retail investors trade more in and out of "sectors" to capture the optimum macro environment. I thought it would be fun to look at some of the most incorrectly classified stocks. For me it would have to be either Marley Spoon or Kogan which are both in the Australian Tech index. Lets be real, Marley Spoon is food delivery and Kogan is website only version of harvey norman. The "tech" sector seems to me to be anything that has a website - so why not include 99% of companies!

Love to hear other people thoughts on the topic and possibly some sector classifications you find amusing?

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Vandelay
3 years ago

@Carbonite Thanks for the response! I agree in the most part, sector classfication being a way to broadly look at diversifying your portfolio. I like the idea of bottom up investing - looking at companies i like regardless of the sector that they classify themselves. Why do you feel sectors are definitely important? Is this just due to being risk adverse through diversification as you have explained ?

I think we may have to disagree on Kogan, maybe im not as well versed on the company as you, but i dont think it compares to Amazon. I wasnt aware Kogan do software ? Apart from the online retail component of both (even Myer has an online retail platform), Kogan seems to dabble in other areas but not materially. Whereas Amazon hasmany arms of the business id clearly put under the Tech banner including AWS, twitch, audible, alexa, amazon prime, app store, amazon music etc. 

I definitlely agree that "tech" is now the most broad.

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Vandelay
3 years ago

Yep Amazon is amazing business. If Kogan can expand their revenue model like amazon has by utilizing Kogan's existing online platform as a base, that would be a big success. I did say that Kogan was the "website only version of Harvey Norman", meaning they sell the same stuff, but one is primarily online and the other is not. So, yes i agree they are not comparable. You mention their risks are different. What are these deifferentiating risks, in your view ? And which one do you feel is riskier ?

Still genuinely curious about your answer to the question in my previous post:- "Why do you feel sectors are definitely important? Is this just due to being risk adverse through diversification as you have explained ?"

I like hearing other investors thoughts on topics, as it gives me a broader perspective on things and expands my knowledge base. 

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