Definition
Mid-Cap, short for middle capitalization, refers to companies with a market capitalization between $2 billion to $10 billion. Market capitalization is calculated by multiplying a company’s share price with the number of shares outstanding. Mid-cap companies are typically between small and large-cap companies, often considered as transitional or growth-phase companies.
Phonetic
The phonetics of the keyword “Mid-Cap” is: /mɪd kæp/
Key Takeaways
- Mid-Cap Companies Are Mid-Sized: Mid-cap (middle capitalization) companies are typically defined as firms with a market capitalization between $2 billion and $10 billion. They represent a middle ground in the market, being larger than small-cap companies but smaller than large-cap companies.
- Balanced Risk and Growth Potential: With their combination of established business infrastructures and potential for growth, mid-cap stocks can offer a balance of risk and return. They are considered less risky than small-cap companies because they have more established businesses, but they also usually have more growth potential than large-cap companies.
- Less Media Coverage: Mid-cap stocks tend to get less media attention than large-cap stocks, which can make them more challenging to research. However, the lack of coverage can also provide opportunities for informed investors to discover and benefit from these overlooked or undervalued companies.
Importance
The term “Mid-Cap” is crucial in business/finance as it represents companies with a market capitalization typically ranging between $2 billion and $10 billion. This category occupies a significant position in the financial landscape as it features businesses that are in a more developmentally advanced stage compared to small-cap firms, yet are still poised for growth unlike large-cap firms. Mid-cap companies, typically characterized by a balance of risk and growth, provide unique investment opportunities for investors. The relative stability, coupled with the capacity for expansion, makes them attractive for investors looking for companies with growth potential but are willing to assume a little more risk.
Explanation
Mid-cap refers to companies with a medium market capitalization, falling between small-cap and large-cap entities. The purpose of classifying companies into these categories is to help investors understand the nature of the companies they are investing in. In the context of mid-cap companies, they are often seen as those with potential for significant growth and expansion. While they have surpassed the volatility often associated with smaller, burgeoning ventures, they are not as stable as large-cap companies that dominate the market. This offers a unique blend of risk and reward which can be attractive to many investors.Mid-cap stocks serve not only as a potential investment with solid growth prospects, but they also play a crucial role in diversifying an investment portfolio. These companies tend to be in the middle stage of their business life cycle – mature yet still nimble enough to respond to market trends and changes. This characteristic often makes them more resilient during economic downturns than smaller companies, while still offering more room for growth and higher returns than larger, fully mature companies. They could serve as a balance in an investor’s portfolio between the relative safety of large-cap stocks and the volatility and potential high returns of small-cap stocks. Investing in mid-cap stocks can therefore be a strategic decision for an investor looking to strike a balance between growth, risk and diversification.
Examples
Mid-Cap is a term used in the stock market to refer to companies with a market capitalization (the total value of all their outstanding shares of stock) in the middle range of listed stocks. They are typically defined as businesses with a market cap of between $2 billion and $10 billion. Here are a few real-world examples:1. Grubhub Inc: Grubhub (GRUB), an online and mobile food-delivery service, is often named as a mid-cap company. As of 2020, the company had a market cap of around $6.6 billion.2. Crocs, Inc: Crocs, a company that designs, manufactures, and markets footwear for consumers in the U.S. and worldwide, is another mid-cap company. Its market cap has typically hovered between $2 billion to $8 billion in recent years.3. Dunkin’ Brands: Until it was purchased by Inspire Brands in 2020, Dunkin’ Brands (which owned Dunkin’ and Baskin-Robbins) was a typical mid-cap company with a market cap around $8.3 billion before the selling process began. Please note that the status of these companies as mid-cap can change over time. The exact market caps should be checked for the most recent data.
Frequently Asked Questions(FAQ)
What does Mid-Cap stand for?
Mid-Cap refers to companies with a medium market capitalization. It’s a term used in finance to classify companies according to their total market value or capitalization.
How is Mid-Cap calculated?
The Mid-Cap of a company is usually calculated by multiplying the stock price by the company’s total number of outstanding shares.
How are Mid-Cap companies classified?
While there’s no standard definition, most financial analysts consider companies with a market cap between $2 billion and $10 billion to be mid-cap.
Are Mid-Cap stocks riskier than Large-Cap stocks?
Generally, Mid-Cap stocks are considered riskier than Large-Cap stocks. This is primarily because Mid-Cap companies are less established and may face more business risks. However, higher risk can also mean potential for higher return.
How do Mid-Cap stocks perform compared to Small-Cap and Large-Cap stocks?
Mid-Cap stocks may offer a balance between the growth potential of Small-Cap stocks and the stability of Large-Cap stocks.
Where can I invest in Mid-Cap stocks?
You can invest in Mid-Cap stocks through many brokerage platforms or mutual funds that specialize in Mid-Cap companies.
Are Mid-Cap companies only found in certain sectors?
No, Mid-Cap companies span across all sectors, such as technology, finance, healthcare, consumer goods and so on.
How frequently should I monitor my Mid-Cap investments?
The frequency of monitoring would depend on your individual investment strategy. However, due to the potential higher volatility of Mid-Cap stocks, it may be advisable to regularly review these investments.
Why should I consider owning Mid-Cap stocks in my portfolio?
Mid-Cap stocks can offer a good balance of growth and risk for investors. They can provide diversity to a portfolio, and have the potential to deliver solid returns.
: What are some examples of Mid-Cap companies?
Examples of Mid-Cap companies may vary over time as their market capitalization changes. Checker your broker or financial news outlet for up-to-date info on which companies are considered mid-cap.
: Is investing in Mid-Cap stocks right for me?
Investing in Mid-Cap stocks could be suitable if you are seeking potentially higher returns and are willing to accept a higher level of risk compared to investing in Large-Cap stocks. As always, you should carefully consider your financial goals, risk tolerance, and investment timeline before making investment decisions.
Related Finance Terms
- Equity Capitalization
- Publicly Traded Companies
- Stock Market Index
- Investment Portfolio
- Risk Diversification
