In our last post, we defined market capitalization.
To refresh your memory, market capitalization is the market value of a company determined by its stock price and number of shares.
MARKET CAPITALIZATION = CURRENT STOCK PRICE X SHARES OUTSTANDING
We can use market capitalization to distinguish between three major stock categories: Large, Mid, and Small capitalization (cap).
What is the difference between large, mid, and small cap stocks?
The difference is the market value of the companies, the three categories are determined by a range as seen below:
A company that is valued more than $10 billion!
Examples: Apple, Microsoft, and Amazon
A company that is valued between $2 billion and $10 billion.
Examples: Dominos, Jet Blue, and Wendy’s.
A company that is valued between $300 million and $2 billion.
Examples: Barnes and Noble & the Cheesecake Factory.
Next time you’re watching the news or perhaps looking at your retirement portfolio investment options, this should give you some more expertise.
Don’t worry, I’ll explain why we own these different categories of stocks in a later post – stay tuned!