In this update to one of the most important items in our article library, Merriman shows how a series of simple but powerful concepts can benefit patient, thoughtful investors. This 2013 revision updates our hypothetical examples with data through 2012.
The technical formula to determine market capitalization for a publicly owned company is share price times the number of shares outstanding. Most people know it better as it relates to large, mid, and small company mutual funds. The following parameters are generally accepted to determine the categorization of a given company:
Large-cap: Greater than $10 billion
Mid-cap: $2-10 billion
Small-cap: Less than $2 billion
Another way to look at market capitalization is as it relates to different countries. On December 31, 2009 the total world market capitalization equaled $28.6 trillion. The largest component of this figure was the United States taking up $12.1 trillion or 42% of the total. The next two largest countries were the United Kingdom and Japan each weighing in at about 9%. To put it back in the perspective of an individual company Microsoft has a capitalization of $269 billion. This is roughly equivalent to the economies of Hong Kong and South Africa. Per the above guidelines Microsoft would be considered a large cap stock.