What Is the Difference Between Large Cap & Small Cap Stocks?
Cap in stock market terms refers to market capitalization. The market cap of a company is the total value of the company's outstanding shares. As a company increases in value from selling shares and having the shares go up in price, the market cap of a company will grow. Investors use market capitalization to divide the market into companies by size.
Other People Are Reading
-
Market Cap Categories
-
Market capitalization of a stock is the current share price times the total number of company shares outstanding. Stock market professionals and investors divide the universe of stocks into large, mid and small market capitalizations. The three different sections of the market tend to perform together as a group and often small, mid and large cap stocks will be moving in different directions. There are numerous stock market indexes available to track the performance of the different levels of market capitalization.
Large Cap Stock
-
Large cap stocks are the very largest companies by stock market value. One rule of thumb defines large cap as companies with greater than a $10 billion market capitalization. The S&P 100 stock index tracks the 100 largest U.S. companies and at the end of 2010, those companies had an average market cap of over $70 billion. The smallest company to make the S&P 100 had a market cap of $6.6 billion. Stocks with a market cap over $200 billion are sometimes referred to as mega cap companies.
-
Small Cap Stocks
-
The definition of small cap stocks usually cuts off at $2 billion. Companies with market values below $2 billion are considered small cap stocks. A further division of the small cap arena discusses stocks with market caps below $300 million as micro cap stocks. At the end of February 2011, the 600 stocks in the S&P Small Cap 600 stock index had market caps ranging from $40 million to $3.68 billion.
Mid Cap Stocks
-
Mid cap stocks are the companies with market caps between small cap and large cap. The rules of thumb have mid cap from $2 billion to $10 billion. In the S&P stock indexes, the S&P Midcap 400 companies are the 400 stocks from the S&P 500 stock index that are not in the S&P 100. Other index providers will define the market cap cutoff levels differently.
Finding Market Cap and Other Considerations
-
The market cap for any stock can be found on any of the financial websites like Yahoo! Finance, MarketWatch or Google Finance. Enter the stock symbol and the market cap will be included on the stock price page. The designations of small, mid and large cap stocks are flexible. If the overall market drops 30 percent in value, there will be many fewer large cap stocks and many more small cap stocks by the definitions. If the market rises, stocks may move out of the small cap area into what is thought of as mid cap.
-
