It also means that active fund managers invested purely in large cap stocks may find it difficult to outperform the stock market, as has historically been the case for US fund managers and the S&P 500. “The stock market is much more perfectly priced for equities in big-cap land,” said Niznik. Large-caps are more likely to trade at or around fair value, making it hard to find a bargain, says Mark Niznik, who manages the Gold-rated Artemis UK Smaller Companies Fund. This is useful because it allows investors to be well-informed about these companies, however, this glut of information also means that it is harder to buy these companies at a discount. There is a wealth of research and information about large-cap companies. However, large-cap stocks also tend to have a less volatile share price and are more likely to pay dividends to investors. Large-cap companies have a lower potential for aggressive expansion and growth, as growing a company 20% in a year is more achievable from a low base. Examples include BP ( BP.), Apple ( AAPL) and Barclays ( BARC). Because of their size they are often featured in news stories. They are often household names with recognisable logos, and are widely held by investors both as individual shares and as part of composite equity funds. These tend to be conglomerates with operations and revenue streams across the globe. Large or mega-cap companies are the largest companies in the world. These micro-cap stocks are less likely to be found in small-cap funds and are less liquid than their larger counterparts making them more risky.
These are known as micro-cap stocks but are still included within Morningstar’s small-cap category. Shares with a market cap of less than £150 million may be found on the Alternative Investment Market. The FTSE Small Cap index includes stocks worth as little as £150 million. Mid-cap companies are generally considered to be those listed on the FTSE 250, which ranges from a market cap of approximately £4 billion down to £500 million. The smallest company within the FTSE 100 is Weir Group with a market cap of £3.8 billion. In the UK large caps are generally considered to be those that are listed in the FTSE 100 index.
Mid-cap stocks represent the next 20% and small-cap stocks make up the remainder. Morningstar defines large-cap companies as those that account for the top 70% of the capitalisation of a domestic stock market. Defining Large, Mid and Small-Cap CompaniesĬompanies are considered to be large-, mid- or small-cap based on the market capitalisation of a company, which is its overall value the greater the value, the larger the cap.
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