Large, Medium and Small-cap Stocks

Can you classify the stocks by their size; small-cap stocks, medium-cap stocks and large-cap stocks. Cap is short for market capitalization, which is the market value of a company.

The market value of a company is determined by multiplying its market stock price by its number of outstanding shares. Market capitalization are always changing, and although the definitions include a market value for each category, these market-value threshold classifications also change over time. Below are the differentiating values for groupings of companies by size.

Large-cap stocks are those large company stocks with considerable earnings and large amounts of common stock outstanding. This group has a market capitalization larger than $5 billions.

The large-cap stocks represent companies located in the lists of Dow Jones Industrial Average and S&P 500 Index. These large-cap companies monopolize more than half of the total value of the US equity markets.

These are blue-chip, established companies that can either be growth or value companies. Some examples are Intel, Microsoft, IBM, General Motors, Exxon Mobil and many other large leading companies in their respective industries.

During the explosive growth of prices of Internet related stocks by the late ?90s, where many of these stocks had a market capitalization that qualified them as large-cap stocks. Although many of these companies did not have any type of earnings. With a market capitalization of about $1 billion and $5 billions.

The medium-cap companies have the safeguard of having significant assets in respect to their capitalization, but could not be so well known to the average investor. Some examples of renowned medium-cap companies are Tyson Foods, Outback Steakhouse, Starbucks and Borders.

Small-cap stocks are those stocks of small-sized companies with a market capitalization of less than $1 billion. Small-cap companies generally are not household names, although they offer the most attractive return opportunities.

According to studies done this group of stocks have overcome large-cap stocks during long periods. Small-cap stock prices tend to be more volatile than the large and mid-caps due to their exposure to risks.

Some small-cap companies are potentially the Intels and Microsofts of tomorrow. Nevertheless, many small-cap companies stay out of business and other grow enough to become in medium and large-cap companies.

Because small-cap stocks are riskier investments, you should diversify your holdings of them to reduce your overall risk of loss. What becomes apparent from these classifications of common stock types is that companies stocks can be placed in several classifications. The pharmaceutical company Johnson & Johnson can be classified as a blue-chip stock, a growth stock, a large-cap stock and a defensive stock.

These classifications are useful when you are planning your portfolio to determine the types of stocks you want to own and the percentage of each that you want to hold.