stock clusterization.there are various significant classes of stocks that help investors/traders to make more insightful and informed decisions when choosing the right stocks of choice here are my most important and favorite.
1.MARKET CAPITILIZATION
this is the size/ total value of a company's outstanding shares of stock,
which can be calculated with a simple formula of :
outstanding shares X share price of stock = market cap value
MEGA CAP = capitalization of over $200 Billion.
LARGE CAP = $10 Billion - $200 Billion
MID CAP = $2 Billion - $10 Billion
SMALL CAP = $300 Million - $2 Billion
MICRO CAP = $50 Million - $300 Million
NANO CAP = under $50 Million.
- the larger the market cap the more stable and safer the stock, even though they are less liquid and more risky smaller cap companies provide more room for growth.
2. LIQUIDITY
this is how fast and easy stock shares can be sold and bought without significant impact on stock price or simply transaction speed and easiness.
HIGHLY LIQUID = Volume (OVER 1,000,000 shares traded daily) - LOW SPREAD
LIQUID = Volume (100,000 - 1,000,000 shares traded daily) - MEDIUM SPREAD
ILLIQUID = Volume (Under 100,000 shares traded daily) - HIGH SPREAD
3. BUSINESS LIFECYCLE
these are the most crucial stages of a business from the very beginning to the end product which tracks it's growth, maturity and decline. this is highly significant as it aids investors identify potential business growth or downsides.
the main 5 lifecycle stages are :
1. Starp-up - the development stage of business showcasing projection of future business dealings and events.
2. Growth - this phase is when operations are ongoing and business expands and cashflow increases, its key on how business survives and grows
3. Maturity - a company reaches maturity when it stands firm on its feet showcasing recurring revenue which is the stage where crucial management of resources ensuring continued growth.
4.Decline - this is stage for companies that didn't have a prolonged revenue and growth due to external and market conditions and capital and market expertise is necessary to safe and keep business afloat in this phase.
5. Exit - this is when a business is in a stage where original investors choose to exit company either by Initial Public Offering / executive buyout.
4. DIVIDEND POLICY
this is a policy that a business/company uses to structure dividend payout to common stock sharesholders.
this is crucial also when stock-picking or classification as no dividend companies don't pay dividend on stocks and usually reinvest the profits back in business this may increase expansion and growth and stock price guaranteeing higher returns when investor may choose to sell stocks.
put together by : Pako Phutietsile as @currencynerd
