Small-Value Stock

- a la shmoop. how do you differentiate between large-cap mid-cap and small-cap

companies? all right well people it's all about the

cap ,so what is the cap again? no no this cap. that's market cap. market [woman holds graduation cap]

capitalization or rather the value that Wall Street investors are placing on the

company's future earning hours- that's how you kind of value companies right?

well simply put to make categorizing investing in these companies easier,

mutual funds and index funds have somewhat arbitrarily created brackets

for the three different sizes of companies. the presumption runs that

smaller companies carry more risk but grow faster than very large companies.

they're more volatile and they appealed to a certain type of investor. medium

sized companies well yeah there's somewhere in the middle, shockingly. and [3 company sizes listed]

well yeah large cap they don't grow as fast a dividend usually and kind of they

are what they are. so what are the numbers. well this is how they were

created. the first gradation was started at a billion dollars or so and it ended

at about five billion like below a billion it's like a nano cap. or it's a

really small cap company and many companies grow through all three phases

of small medium and large cap. take a Netflix- please for 995 a month they pay

those four to say that. all right well Netflix came public at a valuation of [man speaks to camera]

around 300 million dollars, really small small cap. it then grew and grew and grew

from being a small cap company to a mid cap company when it passed the valuation

of five billion dollars, and then continued growing to the large cap

behemoth it is today at 50 billion plus. Netflix did well. so Netflix generally

kept its number of shares outstanding flat-ish few options there it got that

looted a little bit, and as a stock price rose the market capitalization rose, as

well or said another way investors valued the company more and more highly.

so Netflix graduated from being a small cap to being a mid cap, a half dozen [Netflix logo with stocks and investors pictured]

years or so after it went public, and a half dozen or so years later it

graduated past the twenty five billion dollar threshold to being considered

a large cap company. today and there's another casual class called mega cap

which generally comprises companies with market valuations over a hundred or two

hundred billion dollars. these companies are behemoths like ATT

Apple Amazon and many other companies whose names don't start with the letter

A. so that's it they differ between large mid and small cap companies you'll have

to make like Goldilocks and choose the one that's just right for you. [Goldilocks smiles at three bowls of various sizes on a table]