This piece is an extension of the “Sector strategies for navigating 2023” report, which concluded with the top eight sectors for the remainder of 2023 and a review of the biotech opportunity in particular. Here, I will review five of the eight industries with the highest expected earnings growth rates over the next three to five years. The following table, compiled from State Street, displays these industries and their summary data.

S&P Indices for Top 5 Growth

Source: State Street Corporation. Created by Brian Kapp, stoxdox

The PE FY 1 column is the PE based on forward earnings estimates, the 3-5 yr % column is the expected annual earnings growth rate, and the market cap column is the weighted average for each industry in billions of US dollars.

Top 5 Industries for Earnings Growth

I have covered many individual companies in the above industries. As a result, I can attest to the relative attractiveness of the groups. The constituents in each index fund offer broad industry exposure via the number of companies (231) and the modified equal-weighted approach (46 companies per industry on average).

These factors, especially the weighting methodology, outweigh the relatively small negative effects expected from the less than desirable companies in each index. One could complement the industry exposure above with a more targeted portfolio of individual stocks and ETFs.

A great example of a missed opportunity in the top five industry list is the metals and mining industry.

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