S&P Large Caps, Not Large Caps Anymore
It used to be that a large cap stock was defined by S&P as having a market cap of $5 billion. Because of the market drop, they revised that to $4 billion in September and now the figure is going…
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It used to be that a large cap stock was defined by S&P as having a market cap of $5 billion. Because of the market drop, they revised that to $4 billion in September and now the figure is going to $3 billion. At the current rate it could be $1 billion by the end of next year.
According to MarketWatch, "These moves reflect the move [in value] in the market," said David Blitzer, managing director and chairman of S&P’s Index Committee. "Had we left the $4 billion requirement for the S&P 500, some companies would’ve had to drop off."
Maybe they should and the S&P 500 could be become the S&P 357.
Individual investors often benefit from being in large caps. Part of their market value often derives from their cash position. A firm with $1 billion in cash on its balance sheet is more likely to have a multi-billion market cap than one with $100 million and a lot of debt. Market cap often means "safety" whether that is true or not.
Being a large cap stock has lost some of its shine. But, at some point no American company may make the new cut-off.
Douglas A. McIntyre
Contact [email protected] for any questions or corrections.
Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
