Twitter IPO / Who Buyin?
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Market Cap
You often hear companies or different mutual funds being categorized as small cap, mid cap or large cap. But what do these terms really mean? The "cap" part of these terms is short for capitalization, which is a measure by which we can classify a company's size. Although the criteria for the different classifications are not strictly bound, it is important for investors to understand these terms, which are not only ubiquitous but also useful for gauging a company's size and riskiness.
Calculating Market Cap
Market capitalization is just a fancy name for a straightforward concept: it is the market value of a company's outstanding shares. This figure is found by taking the stock price and multiplying it by the total number of shares outstanding. For example, if Cory's Tequila Corporation (CTC) was trading at $20 per share and had a million shares outstanding, then the market capitalization would be $20 million ($20 x 1 million shares). It's that simple.
Why It's Important
A common misconception is that the higher the stock price, the larger the company. Stock price, however, may misrepresent a company's actual worth. If we look at two fairly large companies, IBM and Microsoft, on February 15, 2013 stock prices were $199.98 and $28.05 respectively. Although IBM's stock price was higher, we can see that MSFT's market cap of $234.6 billion was actually larger than IBM's $225.1 billion. If we compared the two companies by solely looking at their stock prices, we would not be comparing their true values, which are affected by the number of outstanding shares each company has.
The classification of companies into different caps also allows investors to gauge the growth versus risk potential. Historically, large caps have experienced slower growth with lower risk. Meanwhile, small caps have experienced higher growth potential, but with higher risk.
Different Types of Capitalization
While there isn't one set framework for defining the different market caps, here are the widely published standards for each capitalization:
Mega cap - This group includes companies that have a market cap of $200 billion and greater. They are the largest publicly traded companies such as Exxon. Not many companies will fit in this category, and those that do are typically the leaders of their industries.
Big/large cap - These companies have a market cap between $10 billion to $200 billion. Many well-known companies fall into this category, including companies like Microsoft, Walmart and General Electric, and IBM. Typically, large-cap stocks are considered to be relatively stable and secure. Both mega and large cap stocks are often referred to as blue chips.
Mid cap - Ranging from $2 billion to $10 billion, this group of companies is considered to be more volatile than the large- and mega-cap companies. Growth stocks represent a significant portion of the mid caps. Some of the companies might not be industry leaders, but they are well on their way to becoming one.
Small cap - Typically new or relatively young companies, small caps have a market cap between $300 million to $2 billion. Although their track records won't be as lengthy as those of the mid to mega caps, small caps do present the possibility of greater capital appreciation - but at the cost of greater risk.
Micro cap - Mainly consisting of penny stocks, this category denotes market capitalizations between $50 million to $300 million fall into this category. The upward potential of these companies is similar to the downside potential, so they do not offer the safest investment, and a great deal of research should be done before entering into such a position.
Nano cap - Companies having market caps below $50 million are nano caps. These companies are the most risky, and the potential for gain is often relatively small. These stocks typically trade on the pink sheets or OTCBB
Remember, these ranges are not set in stone, and they are known to fluctuate depending on how the market as a whole is performing.
The Bottom Line
Understanding the market cap is not just important if you're investing directly in stocks. It is also useful for mutual fund investors, as many funds will list the 'average' or 'median' market capitalization of its holdings. As the name suggests, this gives the middle ground of the fund's equity investments, letting investors know if the fund primarily invests in large-, mid- or small-cap stocks.
You often hear companies or different mutual funds being categorized as small cap, mid cap or large cap. But what do these terms really mean? The "cap" part of these terms is short for capitalization, which is a measure by which we can classify a company's size. Although the criteria for the different classifications are not strictly bound, it is important for investors to understand these terms, which are not only ubiquitous but also useful for gauging a company's size and riskiness.
Calculating Market Cap
Market capitalization is just a fancy name for a straightforward concept: it is the market value of a company's outstanding shares. This figure is found by taking the stock price and multiplying it by the total number of shares outstanding. For example, if Cory's Tequila Corporation (CTC) was trading at $20 per share and had a million shares outstanding, then the market capitalization would be $20 million ($20 x 1 million shares). It's that simple.
Why It's Important
A common misconception is that the higher the stock price, the larger the company. Stock price, however, may misrepresent a company's actual worth. If we look at two fairly large companies, IBM and Microsoft, on February 15, 2013 stock prices were $199.98 and $28.05 respectively. Although IBM's stock price was higher, we can see that MSFT's market cap of $234.6 billion was actually larger than IBM's $225.1 billion. If we compared the two companies by solely looking at their stock prices, we would not be comparing their true values, which are affected by the number of outstanding shares each company has.
The classification of companies into different caps also allows investors to gauge the growth versus risk potential. Historically, large caps have experienced slower growth with lower risk. Meanwhile, small caps have experienced higher growth potential, but with higher risk.
Different Types of Capitalization
While there isn't one set framework for defining the different market caps, here are the widely published standards for each capitalization:
Mega cap - This group includes companies that have a market cap of $200 billion and greater. They are the largest publicly traded companies such as Exxon. Not many companies will fit in this category, and those that do are typically the leaders of their industries.
Big/large cap - These companies have a market cap between $10 billion to $200 billion. Many well-known companies fall into this category, including companies like Microsoft, Walmart and General Electric, and IBM. Typically, large-cap stocks are considered to be relatively stable and secure. Both mega and large cap stocks are often referred to as blue chips.
Mid cap - Ranging from $2 billion to $10 billion, this group of companies is considered to be more volatile than the large- and mega-cap companies. Growth stocks represent a significant portion of the mid caps. Some of the companies might not be industry leaders, but they are well on their way to becoming one.
Small cap - Typically new or relatively young companies, small caps have a market cap between $300 million to $2 billion. Although their track records won't be as lengthy as those of the mid to mega caps, small caps do present the possibility of greater capital appreciation - but at the cost of greater risk.
Micro cap - Mainly consisting of penny stocks, this category denotes market capitalizations between $50 million to $300 million fall into this category. The upward potential of these companies is similar to the downside potential, so they do not offer the safest investment, and a great deal of research should be done before entering into such a position.
Nano cap - Companies having market caps below $50 million are nano caps. These companies are the most risky, and the potential for gain is often relatively small. These stocks typically trade on the pink sheets or OTCBB
Remember, these ranges are not set in stone, and they are known to fluctuate depending on how the market as a whole is performing.
The Bottom Line
Understanding the market cap is not just important if you're investing directly in stocks. It is also useful for mutual fund investors, as many funds will list the 'average' or 'median' market capitalization of its holdings. As the name suggests, this gives the middle ground of the fund's equity investments, letting investors know if the fund primarily invests in large-, mid- or small-cap stocks.
I follow a few day trading accounts on twitter and one made a recommendation this morning to pick up mmeg. It was under .003 per share so I picked up 30000 shares for under a hundred and ended up selling them at .0041 per share. Bought groceries for the day. This stock is up 180% today. Brazy.
I picked up a few more nvda shares this am and also bought amd while it was down earlier today. I have 222 nvda shares, which to me is A LOT. Earning report comes out after close tomorrow. I'm hoping for another explosion.
On another note gold prices are starting to come back up.
I picked up a few more nvda shares this am and also bought amd while it was down earlier today. I have 222 nvda shares, which to me is A LOT. Earning report comes out after close tomorrow. I'm hoping for another explosion.
On another note gold prices are starting to come back up.
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nvda roller coaster today. fuuuck... atvi absolutely dominating....
i'm becoming obsessed with this shit. I'd like to semi retire and just trade erryday... my knowledge is so weak tho. Its so addicting to watch your bankroll grow. I picked up LITE, AMD and PI a day or two ago. ECA has quietly been one of my superstars this year.
i'm becoming obsessed with this shit. I'd like to semi retire and just trade erryday... my knowledge is so weak tho. Its so addicting to watch your bankroll grow. I picked up LITE, AMD and PI a day or two ago. ECA has quietly been one of my superstars this year.
Sold SDRL for $400 gain.
Also, extended my real estate and real estate derivatives portfolio over the last 2 weeks
Still want to get into beach front properties like
@Rumpelstiltskin
, nonetheless, trying to get pieces of the Southwest out hurr...
Heard it is time to look into both privately held and publicly traded Warehouse REITs.... look into it...
Also, extended my real estate and real estate derivatives portfolio over the last 2 weeks
Still want to get into beach front properties like
@Rumpelstiltskin
, nonetheless, trying to get pieces of the Southwest out hurr...Heard it is time to look into both privately held and publicly traded Warehouse REITs.... look into it...
looking at shorting NKTR, we will see at opening bell
Props:
phncke and phncke
Also, extended my real estate and real estate derivatives portfolio over the last 2 weeks
Still want to get into beach front properties like
@Rumpelstiltskin
, nonetheless, trying to get pieces of the Southwest out hurr...
Still want to get into beach front properties like
@Rumpelstiltskin
, nonetheless, trying to get pieces of the Southwest out hurr...
One at the beach (LA - Redondo), one in the hills (Orange County) and one in LA.
I might dump the one in LA and buy an apartment complex (4 plex). Not sure yet, but it's looking that way as of now.
I just signed docs for two legal houses on one lot today in Edmonds wa. Bought them both for 550k. Its a small positive cash flow property as it is right now. Both leases expire in July and I will be bringing them to current market value, both houses are way under. I negotiated deals with my real estate agent and loan officer to split commissions on my transaction. By the time my first payment is due I will have collected 2.5 months rent and half my agents commission and half my loan officers commission. If it all works out that will be 22.5k before I write my first mortgage check. My first income properties...
and whomever bought TSLA at 180 and is holding, more power to you.... now over 280....
Props:
phncke and phncke
I have 35. But I bought at 190. Thought about selling today. I'm up like 48% on that play n around 3 months.
I sold lite today. Made enough to buy groceries for the week on that one.
I have a nice chunk sitting aside from my nvda sale. Anyone got any bright ideas?
Also I'm taking some half day class on Thursday to learn more about trading. I don't know shit. The class is free so I'm sure it's a pitch for something else but I'll probably learn some good shit.
I sold lite today. Made enough to buy groceries for the week on that one.
I have a nice chunk sitting aside from my nvda sale. Anyone got any bright ideas?
Also I'm taking some half day class on Thursday to learn more about trading. I don't know shit. The class is free so I'm sure it's a pitch for something else but I'll probably learn some good shit.