Tackle Today: Market Capitalization
June 8, 2021
≈ Market Capitalization≈
Traders,
Wall Street has a unique way of measuring the value of a company. It’s called market capitalization, or market cap for short. To calculate it, you take the number of shares outstanding multiplied by the price per share. For example, if a company has 10 million shares outstanding and is trading for $300, its market cap is $3 billion. In other words, if you were to buy every share of the company, it would cost you $3 billion.
Since there are only two variables, it’s easy to see how a company grows in value. Either the share price increases or the number of shares rises due to stock splits. Of course, since the share price falls on a split, this corporate action doesn’t automatically increase the market cap. But, generally, stocks that split rise again, only this time with twice as many shares (assuming a 2 for 1 split).
To better track the thousands of companies trading in public markets, traders on the Street have come up with three primary categories: small-cap, mid-cap, and large-cap.
Small-cap companies have a market cap under $2 billion.
Mid-cap companies have a market cap between $2 billion and $10 billion.
Large-cap companies have a market cap above $10 billion.
The behavior of stocks in each category varies. For instance, small-caps are often younger companies and carry the potential for higher growth rates. At the same time, they are more volatile and risky. Large caps are the titans of industry that boast superior balance sheets and the power to weather adverse economic conditions.
Here at Tackle Trading, we usually use the S&P 500 (SPY) to track large caps and the Russell 2000 (IWM) to track small caps. Mid-caps don’t get much love but if you want to follow them, try using MDY.
#TeamTackle
Chart of the Day
Can Small-Caps Break Out?
The Russell 2000 is testing the upper end of its three-month trading range. If the breakout bid succeeds, look for additional upside from the little guys.
Video of the Day
Onboarding with Coach Frank
Every Monday night on the Tackle Trading YouTube Channel Coach Frank holds his weekly onboarding class where he highlight’s the products and services at Tackle Trading. We didn’t hold one yesterday because of the holiday weekend. If you are a new member or interested in what Tackle Trading is all about be sure to check out last week’s onboarding class!
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
The Coaches Show 8:30 PM EST
This is our weekly MasterMind group. Join the coaches tonight, 8:30pm EST to discuss the markets and help you prepare for the week.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
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