Capitalization
While Byrne Asset Management
considers companies of all sizes for our managed account clients, mutual
fund investors in the various plans for which we advise can choose funds
focused on companies of specific size categories. One may wish to invested
only in large, well-known names. One may wish to seek potentially larger
returns from smaller firms aiming to become big. Combined with the
growth-value classification, one can exert control on the types of
companies owned and use rebalancing to maintain discipline and perhaps
augment performance.
Large Cap
Though cutoffs vary among
statisticians creating the classifications,
large cap firms are generally those whose capitalization, or equity, is
larger than $5 billion. Most nationally known companies, including all firms
in the Standard & Poor's 500, are in this category.
Mid Cap
Often a transient category through which small
companies pass on their way to the large cap arena, mid cap firms generally
have equity values between $500 million and $5 billion. Regional chains,
successful franchises, and manufacturers of products widely popular but of
limited market size usually fall into this category.
Small Cap
A category in which many
stock pickers made their careers but also one in which many investors lost
substantial sums, small cap stocks include anything under $500 million in
equity. The population of such stocks include start-ups that never make it
and potential megaliths. Firms under $250 million in size are sometimes
referred to as micro cap.