LARGE CAP, MID CAP, SMALL CAP DEFINED

“Millie has her portfolio concentrated in Large Caps.”

“Johnny down at the race track has all of his money in small caps.”

“My advisor recommended that we have some exposure to Mid Caps in this market.”

Large Cap? Mid Cap? Small Cap? What does all this mean? These are just three different ways to categorize stocks by size. Cap = “Capitalization” or “Market Capitalization”. The most popular reason to group stocks into capitalization classes is to make up an index (collection of individual stocks), such as those offered by Standard and Poors.

A stock is a company, a business. Take Walmart (WMT:NYSE) , for example.

A stock has a certain amount of “shares” outstanding (available for the public to buy).

A “share” of stock  is simply one little slice of the overall number available to buy. At the close of business on March 13, 2017, one share of Walmart (WMT:NYSE) stock cost $69.95.

Walmart (WMT:NYSE) has three billion shares outstanding (rounded off). As we said, this means that there are three billion shares of the company available to be bought. Each shares is 69.95 as of the close of business on March 13, 2017.

“Market Capitalization” is simply the total number of shares outstanding multiplied by the price per share. It answers the question “How much would it cost to buy all of the shares available of this company ?”.

Walmart (WMT:NYSE) market capitalization is therefore $209.85 billion (3 billion X 69.95)

So where does this place Walmart (WMT:NYSE) in term of large, small or mid cap?

Large capitalization stocks, such as those represented by the S&P 500 Index are those with market capitalizations in excess of $6.1 billion. As of December 31, 2016 Apple (AAPL:NASDAQ) had the highest market capitalization at $607 billion.

Mid capitalization stocks , as represented by the S&P Mid Cap 400 , are those with total market capitalizations of $1.6 billion to $6.8 billion.  Panera Bread (PNRA:NASDAQ) and Dick’s Sporting goods (DKS:NYSE) are Mid cap stocks with market capitalizations around $5.3 billion.

Small capitalization stocks, as represented by S&P Small Cap 600, are those with market capitalizations  of $450 million to $2.1 billion. Abercrombie & Fitch (ANF:NYSE) has a market cap of $790 million.

There is a range because stocks move up and down each day and just because the stock drifts up into large cap for down in small cap for one day, doesn’t make it part of that capitalization.

 

DISCLOSURE: THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE. ALL INVESTING INVOLVES RISK AND PROPER DUE DILIENCE SHOULD BE PERFORMED BEFORE ENTERING INTO ANY INVESTMENT.

Sources: Standard and Poors, Morningstar