• Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint

Crunching the Numbers

The evidence presented in the last section suggests that investing in smaller, less followed companies or in private businesses can generate a payoff for investors. In this section, you will first look at differences in market capitalization and institutional following across publicly traded firms, then at the initial public offerings in a recent quarter, and finally at the portfolios that would emerge if you decided to put these investment strategies into practice.

Market Capitalization

What constitutes a small-cap company? The answer will vary widely depending upon whom you ask and the universe of stocks they invest in. For an investor who restricts his investments to S&P 500 companies, a billion dollar company may be a small company. For an investor who looks at smaller stocks on the NASDAQ, the cutoff will be much lower. It will also shift as the market goes up and down. At the peak of the stock market in 1999, dozens of companies were trading at market capitalizations that exceeded $100 billion. In 2002, after three years of a bear market, only a handful were left.


PREVIEW

                                                                          

Not a subscriber?

Start A Free Trial


  
  • Creative Edge
  • Create BookmarkCreate Bookmark
  • Create Note or TagCreate Note or Tag
  • PrintPrint