In a previous article we described how to choose stocks based on a relative value approach within a sector. In this article we describe methods for screening sectors for the stocks within them. Many market participants emphasize the importance of sector analysis and argue that no matter how good the quality of a stock, it is highly unlikely that it will outperform if the sector is performing poorly. Many of the ideas in this section were taken from television host and market professional, Jim Cramer. What is Industry Stock Analysis? Industry analysis is the analysis carried out in a specific sector or industry. This is comparable to stock analysis which is research provided on a particular company and stock, or macroeconomic analysis which analyzes the fundamentals of a specific country. Industry analysis investigates the general fundamentals of actions within the industry, but more importantly it investigates the state of external factors and how they are expected to influence a particular industry or sub-industry. Different macroeconomic data and other statistics have a particular impact on certain industries, and analysts evaluate to see how this data will affect them. Additionally, industry analysts also investigate the level of demand, such as consumer tastes, and supply, such as competition within the industry, and how stock prices are expected to be affected. Why is an industry analysis necessary? Many analysts suggest that resisting the economic cycle is futile. For the simple reason that most prices are regulated by large financial institutions that buy and sell the majority of the volume of stocks and these institutions generally place very high weight on the performance or expected performance of a specific sector. After market risk, this is the most influential factor on a stock's performance. To summarize, there are two reasons why industry analysis is important. 1. Generally, a company's performance is a function of industry performance. For example, if raw materials in a particular industry increase, all companies in the industry will be affected. 2. Psychological reasons. If an industry suddenly becomes trendy or if a sudden change in news is perceived as positive or negative for an industry, the stock price will be influenced primarily by what the average investor believes, and most investors will follow the trends of the sector. Industries divided? The industries are divided into groups and subgroups.