Finding interesting businesses

With over 40,000 companies listed on stock exchanges (according to the World Bank), there must be so many interesting businesses out there that we don’t know enough about. Throughout this series of posts, I’ll be finding and analysing businesses I’ve never looked into before.

I’ll use different approaches, but to find the first business to analyse, I’ll identify the industry sector whose stock market returns are the least related to other sectors. Once we have the sector, I’ll repeat the same process with a sample of the top businesses from that sector (by market capitalisation) to find the first business to analyse.

Which industry sector is the least related to other sectors?

If the performance of an industry sector over the last 12 months is different to every other industry sector, then the businesses within that industry sector are probably facing different challenges.

The performance of each sector over the last 12 months, using the Global Industry Classification Standard (GICS), can be seen on the chart below. I’m using the closing prices of ETFs for those industry sectore rather than the MSCI indexes, but the differences should not affect the outcome.

It’s not immediately obvious which sector is the least related to others when looking at the performance alone; however, the correlation matrix below clearly shows that utilities is the least related to other sectors:

Which utilities business should I analyse?

I’ve chosen 9 of the largest listed global utilities companies, and produced a correlation matrix from the daily closing share prices of each company:

Both NextEra Energy and EDF show a low correlation to the other utilities businesses. I’ve never looked into NextEra Energy before, so I’ll analyse NextEra Energy in my next post.