Sector Selection

Page Updated on October 9, 2026

Sector Selection is the first step of the StockZuse Research Strategy. Its purpose is to identify the broad areas of the U.S. stock market demonstrating the strongest recent market leadership.

Rather than beginning with individual companies, the Research Strategy begins with the 11 S&P 500 sectors. The sectors are ranked by trailing one-year performance, and the three highest-performing sectors advance to Industry Selection.

Sector Selection helps answer the first question in the Research Strategy:

Where is the market currently showing the strongest leadership?

The Fidelity Sector Tool

StockZuse developed and tested Sector Selection using Fidelity’s Sector Tool.

The Fidelity Sector Tool is available at:

digital.fidelity.com/prgw/digital/research/sector

As of this writing, the Fidelity Sector Tool is available without requiring a Fidelity account.

The Sector Tool is particularly useful to the StockZuse Research Strategy because it provides both sector and industry research within the same tool and classification structure. The sectors identified during Sector Selection can therefore be carried directly into Industry Selection without translating categories between unrelated data sources.

This was an important consideration in developing the Research Strategy. Earlier approaches used information from multiple sources and required categories from one source to be mapped to categories used by another. That added complexity and sometimes required judgment about whether differently defined categories represented the same area of the market.

Using a common classification structure removes that mapping step and helps keep the process simple and repeatable.

Fidelity provides the research tool and classification framework. StockZuse provides the Research Strategy rules for using that information.

How to Select the Three Sectors

Open the Fidelity Sector Tool using this link:

Open the Fidelity Sector Tool

When the Sector Tool opens, select Sectors if it is not already selected.

Locate the section titled Sector performance near the top of the page. The table displays the S&P 500 sectors and their performance over several time periods.

For the StockZuse Research Strategy, use the 1-year performance column.

Click the 1-year column heading as necessary to sort the table from highest performance to lowest performance.

The table also includes a row labeled S&P 500. This represents the broader S&P 500 index rather than an individual sector. Do not include the S&P 500 row when selecting the three sectors.

Starting with the highest-performing sector, identify the three S&P 500 sectors with the highest 1-year performance.

These three sectors advance to Industry Selection.

Why Start With Sectors?

The U.S. stock market contains thousands of individual companies operating across many different areas of the economy. The StockZuse Research Strategy does not begin by attempting to find individual stocks from that entire universe.

Instead, it progressively narrows the research universe.

Sector Selection starts at a broad market level by comparing the 11 S&P 500 sectors. Comparing sector performance identifies areas where recent market leadership is strongest at the sector level.

The objective is not to determine whether a sector itself should be purchased. Sector Selection is a candidate-discovery filter used to determine which broad areas of the market advance to the next stage of the Research Strategy.

The three selected sectors define the market areas that are eligible for Industry Selection. In the next step, all eligible industries from the three selected sectors are combined into a single aggregate group and ranked together by trailing one-year performance.

This distinction is important. Selection of a sector does not guarantee that an industry from that sector will ultimately become a Target Industry. Sector Selection determines which industries enter the next stage of the Research Strategy; Industry Selection determines which of those industries advance.

Why Use Trailing One-Year Performance?

StockZuse uses trailing one-year performance as a consistent measure of recent market leadership.

Fidelity’s Sector performance table provides several performance periods. The StockZuse Research Strategy deliberately uses a single period—1-year performance—so that every sector is evaluated over the same time horizon using the same rule.

Shorter periods can be heavily influenced by more recent market movements, while much longer periods can emphasize market conditions that are less relevant to identifying current leadership.

The Research Strategy does not combine one-year performance with daily, one-month, three-month, year-to-date, five-year, or ten-year performance when selecting sectors.

This keeps the selection process mechanical: one market universe, one measurement period, and one ranking rule.

Trailing one-year performance is used to identify where market leadership currently exists. It is not a prediction that the strongest-performing sectors will continue to outperform.

Past performance does not guarantee future results.

Why Do Three Sectors Advance?

The StockZuse Research Strategy retains the three highest-performing sectors.

Three is a defined narrowing rule of the Research Strategy. Applying the same rule each time prevents the number of sectors advancing from being changed based on market opinions, forecasts, or subjective judgments about which sectors appear attractive.

A sector does not need to exceed a particular performance percentage to qualify. The sectors are ranked relative to one another, and the three highest-ranked sectors advance.

This means three sectors advance even when overall market conditions are unusually strong or weak.

The purpose of selecting three sectors is not to reserve representation for each sector later in the Research Strategy. Instead, the three sectors establish a broad market-leadership filter. Their industries will be combined and ranked together during Industry Selection, and the strongest industries will advance regardless of which selected sector they belong to.

Information Not Used for Sector Selection

Fidelity’s Sector Tool contains considerably more information than is required for Sector Selection.

The StockZuse Sector Selection rule does not use shorter- or longer-term performance periods, sector market capitalization, market weight, analyst ratings, charts, news, recognizable companies, or other information available through the Sector Tool.

Those items may be useful for other types of research, but they do not affect which sectors advance under the StockZuse Research Strategy.

For this stage, the selection is determined solely by trailing one-year performance among the 11 S&P 500 sectors.

What the Results Mean

Selection as one of the three leading sectors does not mean that StockZuse considers the sector a good investment or expects it to continue outperforming.

It means only that the sector currently ranks among the three highest-performing S&P 500 sectors under the defined Sector Selection rule.

Likewise, a sector that does not rank among the top three has not failed an investment-quality test. It simply does not advance during that Research Strategy run.

Selection also does not guarantee that the sector will be represented among the final Target Industries. During Industry Selection, all eligible industries from the three selected sectors are ranked together as a single aggregate group. A selected sector may contribute multiple Target Industries or none at all.

Market leadership changes over time. Repeating the Research Strategy later may produce a different group of selected sectors.

The Research Strategy uses these rankings for candidate discovery, not portfolio management. A company identified during an earlier Research Strategy run does not cease to be a research candidate simply because its sector does not qualify during a later run, and changes in sector rankings are not buy or sell signals.