"Equity Investments": Industry and Company Analysis

C is correct. Consumer discretionary companies derive a majority of revenue from the sale of consumer-related products or services for which demand tends to exhibit a relatively high degree of economic sensitivity. A hotel would be an example of a business activity that falls into this category.

A is incorrect. The consumer staples sector includes consumer-related companies whose business tends to exhibit less economic sensitivity than other companies. Examples of business activities that frequently fall into this category are tobacco manufacturers. Tobacco is an example of a consumer staple name whose business is less economically sensitive. 

B is incorrect. Biotechnology fits in the health care sector, which does not tend to exhibit a high degree of economic sensitivity.

B is correct. Companies in the same peer group can have different valuations depending on structure and competitiveness. 

A is incorrect. Valuations may be of limited value when comparing companies that are exposed to different stages of the business cycle. 

C is incorrect. To make a meaningful comparison of companies, analysts should make adjustments to the financial statements to lessen the impact that the finance subsidiaries have on the various financial metrics being compared.