Very often, when I create a ranking, I don’t know what to click in the "Rank Formula results vs. stocks in its: " area. Or Sector, or Industry or Universe…
Is there any rule of thumb or any specific way to do this? Or what is your opinion on that subject?
Maybe when we are talking about fundamental rules, it’s best to click the “Industry”, and in technical rules the “Universe”, for example?
Thanks! 
Here’s a rule of thumb. For every ranking node, think of a software company, a department store, and a gold mining company. If your node uses an item that’s going to be extremely different between those three companies, rank vs industry (for example, assets, inventory, receivables, intangibles, depreciation, R&D). If it doesn’t, rank versus the universe.
The real exceptions are when you WANT to favor certain industries and when you want extreme companies regardless of industry. For example, I rank short interest by industry because health care companies in general have much higher short interest than insurance companies, and I don’t want to be saddled with a lot of insurance companies. But if I were looking for companies with massive short interest in order to exclude them, I might rank on the universe instead.
My $0.02 to add to Yuval’s comments:
Might make sense to include both universe and industry for the same factor. For example, maybe ROI vs. both universe and industry might be both beneficial for different reasons. Similarly, comparing something like inventories might make more sense at the industry level than globally.
I think traditional valuation measures might be one area where ranking by industry can be particularly useful. For example, low price/sales vs universe is going to skew towards low margin industries. Ranking that p/s by industry might help control some for that. Same for other valuation measures imho. I think in valuation I mostly use industry comparisons - but that could be because last year I focused my models more toward growth - and that rarely looks cheap - but it could’ve been what I needed to do to surface the kinds of companies I wanted my model to be selecting. It could be different if you’re targeting a different kind of company. I’m not sure.
Great, thank you very much for your help.
I currently use industry comparisons for many of my factors (e.g. value and growth factors). However, the problem with some industries is that they sometimes only consist of a small number of stocks, which can potentially skew the ranking results. Therefore, I thought in many cases it could make more sense to rank within the sector rather than the industry. Any thoughts on this or do you have any particular criteria for deciding when it's better to rank versus industry or alternatively versus sector?
Using subsector ranks can be useful. One can't do so directly in a ranking system node, but you can use FRank with the #subsector parameter and rank vs universe. Note: there is a limit as to the number of nodes in a ranking system that you can do this with.
That is really helpful. Many thanks for your great tip on how to use #subsector in a ranking system node. I hope that ranking within subsectors could be a good compromise to replace industry comparisons.