Make Money With IBD Stock Checkup: Fifth In A Series Small, medium, or large? That's a question you'll likely get at a burger joint.
Investors also face this question when trading stocks. It's good to know whether small caps, mid caps or large caps are favored in the market. Being aware of this can help you earn a bigger return.
A company's market capitalization (market cap for short) is simply the number of diluted shares outstanding multiplied by the current market price of one share. It basically tells you the value of the company as Wall Street sees it.
Apple (AAPL) has a market cap of about $559 billion, making it the most valuable company in the world. It overtook oil giant ExxonMobil (XOM) for that distinction earlier this year.
Large-cap stocks have market capitalizations of at least $10 billion. They are the corporate giants of the world who are well established in their respective industries. They're often household names, like Wal-Mart (WMT), IBM (IBM) and Coca-Cola (KO).
Large caps are often deemed to be slower-growing firms. Their stocks tend to have more liquidity and less volatility, but can still make big runs over time.
Small-cap companies have market caps generally between $300 million and $2 billion. They are usually younger, faster-growing firms. These stocks tend to be less well-known, thinly traded and more volatile. Mid-cap stocks are in the middle of the road. They have market caps of roughly $2 billion to $10 billion.
These classifications can change over time.
At times, either large, small or mid-cap stocks will lead the market. Check out charts of the S&P 500, S&P 600 and S&P 400 to see which is outperforming.
Investors can also turn to IBD's mutual fund section. One chart compares how small-cap growth funds are faring against large-cap growth funds.
Check the line's trend. When the line is rising, small caps are outshining big caps. When the line is falling, big caps are showing outperformance. Once in a while, the graph is adjusted to show how the big cap funds are faring vs. the small caps.
The funds in the index are located in the box on the upper left. Some of these funds' top holdings are in the box to the right.
