Financial Services and Wall Street Journal

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What kinds of industries tend to be better performers in the medium to long term? Why? What kinds of industries tend to do poorly in the medium to long term? Why?

In determining the industries that performs better or poorly, it is important to note that better performance indicates better profitability and poor performance indicates loss or minimal profitability. Since we are considering medium and long-term performance we will be considering performance data ranging anywhere between three to five years (3-5 yrs.). Reviewing the industry performance list published by Morningstar and the Industry Research published by Market Watch of the Wall Street Journal, the performance data indicate that the following industries are better or poor performers in the medium and long-term: •The following industries tend to be better performers in the medium and long-term: (1)Oil & Gas Sector: Pipeline industry.

(2)The Basic materials sector: Specialty chemical.
(3)Industrials Sector: Railroads, and Industrial suppliers. (4)Consumer Goods Sector: beverages, Tobacco, Recreational products, Clothing and Accessories. (5)Health Care Sector: Biotechnology.
(6)Consumer Services Sector: Travel & Tourism, Restaurant & bars, Hotels and Gambling. (7)Financial Sector: Consumer finance, Residential REIT and Retail REIT. (8)Technology Sector: Computer services, and Computer Hardware and Equipment.

The following industries tend to be poor performers in the medium and long-term: (1)The Basic materials sector: Basic resources, Aluminum, Coal, Steel, and Mining. (2)Industrials Sector: Electronic office equipment, and Heavy construction. (3)Consumer Goods Sector: Tires, Brewers and Consumer electronics. (4)Telecommunication Sector: Mobile Telecommunication

(5)Financial Sector: Mortgage Finance, Investment services, bank, Full line insurance, Special financing, and asset management services.

The information presented in both the Morningstar and the Market Watch of the Wall Street Journal shed light on several important points in relation industry performance and it environment. Even though very few industries tends to have continuously performed well throughout years three, four and five, such as the Travel & Tourism industry and the computer hardware industry, overall there appeared to be some level of fluctuations in the performance of most of the industries. Take for example in year three industries such as Consumer finance, Residential REIT and Retail REIT of the Finance sector performed well making the top ten list of best performing industries of the Market Watch of the Wall Street Journal Industry Research list and registering 40 and above in year three Morningstar’s stock industries performance list but they did not make the list in year four and five. This decline could perhaps be attributed to the recession and the financial crises due to the fact that the finance sector has been impacted the most by the financial crises and recession especially the financial service industry (GAIN, 2009, p.3). The financial industry however is going through a transformation, due to the financial crisis, the sector is now view as a sector characterized by high level of corruption and risk especially in the banking industry; this along with new increased government regulation and monitoring is transforming the structure of many industries operating in the financial sector. Banks and financial service institutions are not willing to take big risks and are become more conservative in terms of lending creating a credit crunch especially in the Eurozone. Big financial institutions constantly have to be bailout by governments and there buy losing a lot of their previous operation latitudes. Presently JPMorgan loss $2bn in trading decreasing the market value of JP Morgan by $19bn in just two days, which has resulted to president Obama seeking straighter and tighter financial service regulation (Neate, 2012). These trends and...
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