Select Page
QuestionsCategory: Business QuadrantDoes size of market cap matters!?
Hartono Kasman asked 5 months ago

Hi,
I have question about company’s market cap. In the free Webinar Victor mentioned the size of market cap does matter, i.e below $10B is preferable to allow growth. 

My questions are:
1. What’s the recommended market cap that we should look at?
2. What’s the difference between these companies with small market cap compared with Penny stock
3. What’s the recommended min and max market cap for us to look at good growth stock?
4. In your example, Amazon looks like an undervalued stock for now, but with a high market cap, isn’t their growth will be slower to achieve? 

1 Answers
Victor Chng answered 5 months ago

Hi Hartono,
 

  1. Historically, small & mid cap tend to perform better than large cap stocks over a long time. The size of the market cap is below $10B.

  2. Penny stocks are usually very small market cap stocks such below $50m.

  3. There is no benchmark. 

  4. The current era of asset light model and technology able company have change how large cap used to grow. In the past, those large cap stocks are one dimensional growth which mean they grow in one type of business. Company like Amazon is different because of their network effect they are able to expand multi dimensional growth. For instance, they make money from e-commerce, advertising and cloud. There are literally three business in one company and are fast growing sectors. 
Victor Chng replied 5 months ago

It really depend on the type of company you are looking at. If you are talking about Coca-Cola then I will say size matters since they are one dimensional growth that is almost at saturated point.

Hartono Kasman replied 5 months ago

Great input, thanks Victor and Fifth Person

Jieren Zheng replied 5 months ago

Can I add that sometimes it is easier to grow on a smaller base than a larger base, but naturally you take more risks because it is an IF.

Victor Chng replied 5 months ago

Yes, you are right JR. As long as you know how to manage the risk. It is still worth investing in smaller companies.