MARKET CAP & SECTORS
Plain English
Market Cap is a company's price tag — how much it would cost to buy the whole business. Sectors are the 'aisles' in the stock market grocery store, grouping similar companies together like Technology, Healthcare, and Financials.
Going deeper
Market Capitalization is calculated by multiplying the current stock price by total shares outstanding. It categorizes companies: Mega-cap ($200B+), Large-cap ($10B–$200B), Mid-cap ($2B–$10B), Small-cap ($300M–$2B), and Micro-cap (under $300M). Larger companies tend to be more stable; smaller ones offer more growth potential but more risk. The market is divided into 11 GICS sectors: Technology, Healthcare, Financials, Consumer Discretionary, Consumer Staples, Industrials, Energy, Utilities, Real Estate, Materials, and Communication Services. Sector rotation — money flowing from one sector to another — drives many market movements.
Examples
Calculating Market Cap
Company A: share price $50 x 10M shares = $500M (Small-cap). Company B: share price $10 x 1B shares = $10B (Large-cap). Company B is 20x larger despite having a lower share price. Share price alone tells you nothing about company size.
Sector Performance Cycle
During an economic expansion, Financials and Consumer Discretionary often lead. In a contraction, defensive sectors like Utilities, Healthcare, and Consumer Staples typically outperform. Understanding this cycle helps with portfolio allocation.