The Global Industry Classification Standard® (GICS®) assigns a company to business classifications, such as the Energy sector, according to its principal business activities. Sector is the first level of the four-tiered, hierarchical industry classification system that includes 11 sectors, 24 industry groups, 69 industries, and 158 sub-industries. The GICS assignment system uses quantitative and qualitative factors, including revenues, earnings, and market perception. GICS was developed in 1999 and is jointly managed by S&P Dow Jones Indices and MSCI.
The Energy sector comprises companies primarily engaged in:
- Oil and gas exploration, production, refining, marketing, storage, and transportation;
- Contracted drilling or ownership of drilling rigs that contract their services for drilling wells;
- Manufacturing equipment, including drilling rigs, and providing supplies and services to companies involved in the drilling, evaluation, and completion of oil and gas wells; and
- Production and mining of coal, related products, and other consumable fuels related to the generation of energy.
The S&P 500® Energy includes all companies in the S&P 500 that are assigned to the Energy sector by GICS. Created in 1957, the S&P 500 was the first broad U.S. market-cap-weighted stock market index. Today, it is the basis of many listed and over-the-counter investment instruments.
The Energy sector is the eighth most heavily weighted of the 11 sectors within the S&P 500. As of Dec. 31, 2018, the sector represented 5.32% of the S&P 500 (see Exhibit 2).
There is a lower exposure to Energy in the mid- and small-cap indices, with the ninth heaviest sector weight in the S&P MidCap 400® and S&P SmallCap 600®, at 3.74% and 3.43%, respectively. Overall, in the S&P Total Market Index, which consists of over 3,800 stocks—including those in the S&P 500, S&P MidCap 400, S&P SmallCap 600, and micro caps— Energy was the eighth largest sector, with 210 securities and a weight of 4.99%.
Thirty companies, with a total float-adjusted market capitalization of USD 1,117.72 billion, comprised the S&P 500 Energy as of Dec. 31, 2018. The two largest companies in the sector were Exxon Mobil Corp (XOM) and Chevron Corp (CVX), with float-adjusted market caps of USD 288.70 billion and USD 207.87 billion, translating to S&P 500 weights of 1.37% and 0.99%, respectively. XOM was the ninth largest weight in the S&P 500. The mean market cap of S&P 500 Energy stocks was USD 37.26 billion, the median market cap was USD 21.35 billion, and the minimum market cap was USD 2.94 billion. The top 10 Energy holdings made up 76.37% of the sector. Exhibit 4 shows that the Energy sector was the second most concentrated in its top 10 components among the 11 GICS sectors.