We use the Thomson Reuters Business Classification, an industry classification system that is owned and operated by Thomson Reuters. This is a market-based classification system whereby companies are assigned an industry on the basis of the market they serve rather than the products or services they offer.
This Market-based classification emphasizes the usage of a product rather than the materials used for the manufacturing process. This is done because the performance of companies is tied to the market that they serve and market based systems allow investors to group companies that share similar market characteristics. For example catering services to airlines are considered airport services rather than restaurants because their financial performance is dependent on the market for airline services.
Many investors are used to either the GICS or ICB industry classification schema, or local market schemas such as those offered by FTSE in the UK Market. For an excellent analysis of why the TRBC classification is more effective than these for investors please review this independent white paper. “TRBC uses the most objective, robust process to determine a company’s sector classification.”
As detailed here, TRBC consists of five levels of hierarchical structure, which are economic sector, business sector, industry group and industry, from top to bottom. We use the 2012 schema which consists of: 10 economic sectors, 28 business sectors, 54 industry groups, 136 industries and 837 actitivies.
At Stockopedia we currently publish the Economic Sector and Industry Group levels of the hierarchy (Levels 1 and 3). You can browse our database by TRBC sector here, or for more detail please refer to the TRBC website.
TRBC is used to classify companies as a whole. Where organizations have multiple business segments a representative business is selected according the largest revenue contribution. The assignment process, detailed below, also considers factors such as profitability, asset utilization and market perception when appropriate. Companies are assigned to an Industry, the lowest level. The Industry Group, Business Sector and Economic Sector assignments are derived from the classification hierarchy. Each company is represented by one primary TRBC Industry and companies cannot have multiple primary assignments
Every company in the TRBC universe is reviewed at least annually to determine if the assignment remains valid or whether the company has changed business model and/or business segments have changed in importance either organically or through acquisition/divestment. Over 50,000 companies are therefore reviewed every year by Reuters' dedicated content operations. Their analysts review the detailed financials of each business segment, update company descriptions and review any corporate activity that may have impacted company operations.