Micro cap stocks definition
For instance, there are numerous microcap options that sell for pennies per share. This approach involves buying stocks that the market undervalues at a discount and holding them over time. It’s also possible that you could find microcap stocks that are highly undervalued, which may be attractive if you’re a buy-and-hold investor. Over time, that microcap could grow into a mid-cap or large-cap company and as one of the earliest investors, you could reap the benefits of capital appreciation, that is, the increase in the value of your shares. It’s possible that you could come across a great microcap stock that’s just beginning its upward trajectory. Investing in microcap stocks can offer several advantages if you’re choosing the right companies.įirst, smaller companies may have more growth potential than large-caps. Advantages of Investing in Microcap Stocks Eastman Kodak, for example, is a well-known and established brand but because of its market capitalization, it fits into the microcap stock category. While microcap stocks are smaller companies, that doesn’t necessarily mean they’re complete unknowns. Within that group, there’s a smaller subset of mega cap stocks that have market capitalizations exceeding $200 billion. And large-cap stocks have market capitalizations above $10 billion. Mid-cap stocks are in the $2 billion to $10 billion range. There’s an additional subcategory of microcap stocks called nanocap stocks, which have a market capitalization of less than $50 million.įor comparison’s sake, small-cap stocks have a market capitalization ranging from $300 million to $2 billion. Microcap stocks, which can also be referred to as penny stocks for their low per-share prices, are generally considered to be companies that have a market capitalization under $300 million. If you want hands-on guidance in determining whether to integrate microcaps into your portfolio, consider enlisting the help of a trusted financial advisor. As the name suggests, these are stocks that have a smaller market capitalization than even small-cap tickers, but some can offer the potential to be big winners in a portfolio.
Beyond those groupings, you might also consider investing in microcap stock. For example, companies can be categorized as large-cap, mid-cap or small-cap. Market capitalization means the total dollar market value of a company’s outstanding shares. There are different ways to classify stocks but one of the simplest is by market capitalization.