In order to execute successful trades in the stock market, it is important to have a basic understanding of the types of stock available. The sector and size of a company can be used to categorize its stock. Here are some of the various categories.
The large, mid, and small caps are used to categorize stock by the total value of its outstanding shares. This value is found by multiplying the market value of its stock by the number of outstanding shares. If the total market value is in excess of ten billion dollars, this is generally considered large cap. Companies with a value between one and ten billion are generally considered mid cap. A company is typically considered small cap if its value is less than one billion. Larger cap businesses generally have less volatile stock, while smaller cap businesses offer more potential for growth.
When the phrase penny stock is used, it refers to stock whose shares are worth less than one dollar per share. Due to inflation, the phrase has been expanded in some circles to include shares worth fewer than five dollars each. Generally, a company selling penny stock has not been around very long and is worth less than a few million dollars. Penny stocks are typically small cap stocks, but small caps are not always penny stocks. This is because small cap companies may still sell shares prices at higher than five dollars each. Penny stock is generally considered high risk.
Pink Sheets, more formally known as Pink Quote, displays quotes from over the counter securities. Generally, these are stocks which are not heavily traded because they are penny stock or they are more local in scale. Pink Sheets is not a stock exchange, so companies need not meet SEC requirements to be listed.
Stock may be categorized by the industry it is associated with. This is sometimes referred to as sector stock. Standard & Poor’s divides stock into eleven industries. These industries may be divided into subsectors by some investors. Utilities and consumer staples are considered defensive sectors, while the rest are considered cyclical. Stocktipr classified all stock tips according to the stock’s industry in the companies’ profiles section of the site.
Defensive stock refers to stock that tends to do well when the economy is in a downturn. Products that experience constant demand belong to this category. Food and electricity are examples of this category. By the same token, when the economy improves, defensive stock will not generally improve with the rest of the economy by a great deal.
Cyclical stock refers to stock whose value is closely tied to the behavior of the market. If the economy is poor, cyclical stock will lose its value. If the economy is strong, cyclical stock will tend to gain value. Housing, steel, and the automobile industry are all examples of cyclical stock.
Tracking stock is different from other forms of stock in that it does not give its owner any voting rights with the company. It is linked with the behavior of a parent company’s subsidiary, rather than the success of the entire company.
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Nicolas
