When an industry “outperforms” its sector and the S&P 500, it means that the stock performance of companies within that specific industry has delivered better returns compared to both:
- The sector in which it belongs: A sector is a broader grouping of related industries (e.g., the Technology sector includes industries like software, hardware, semiconductors).
- The S&P 500: This is a stock market index that tracks the performance of 500 of the largest publicly traded companies in the U.S. and serves as a benchmark for the overall market.
In financial terms, “outperformance” generally refers to the percentage gain in the stock prices (or indices) over a specific period of time.
Example:
- If the S&P 500 gains 5% over a year, and the sector (say, Technology) gains 8%, but the software industry within Technology gains 12%, then the software industry has outperformed both its sector and the S&P 500.
Key Metrics to Consider:
- Risk: Often, outperformance can come with increased risk.
- Growth Rate/Return: Comparison of percentage returns.
- Sustainability: Is the industry expected to maintain this outperformance or is it temporary?