Mega cap, or “megacap,” is a term that describes the largest publicly-traded companies, based on their market capitalization. Mega cap stocks typically include industry-leading companies with highly recognizable brands.
Investing in mega cap stocks, along with companies that have a smaller market capitalization, can help build a diversified investment portfolio. Spreading investment dollars across different market caps may allow investors to minimize potential risks. But like any security, mega cap stocks have both pros and cons that investors should consider. Learning more about how they work and what sets them apart from other types of stocks can help you decide whether there’s a place for them in your portfolio.
Market Capitalization, Explained
Mega cap stocks sit at one end of the market capitalization spectrum, representing the very largest companies in the public markets. Market capitalization is a commonly used method for categorizing publicly-traded companies. In simple terms, market capitalization or market cap measures a company’s value, as determined by multiplying the current market price of a single share by the total number of shares outstanding.
For example, say a company’s stock is priced at $50 per share and it has 10 million shares outstanding. Following the formula of $50 x 10,000,000, the company would have a total market capitalization of $500 million.
Most often, companies are assigned to one of three categories, based on their market capitalization as follows:
• Small cap: Market value of $250 million to $2 billion
• Mid cap: Market value of $2 billion to $10 billion
• Large cap: Market value above $10 billion
While most companies fit into one of these three groups, some outliers exist on either end of the spectrum. The smallest of the small cap stocks are microcap stocks, while the largest companies are the mega caps.
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Mega Cap Stock Definition
Mega cap stocks have a market capitalization that’s significantly beyond $10 billion required for classification of large cap stocks. Instead, these companies have market capitalizations in the hundreds of billions or even of $1 trillion or more.
There are a handful of companies with market caps of more than $1 trillion, and those companies only passed the trillion-dollar mark in recent years. That said, it’s likely more companies will become mega cap stocks in the years ahead.
10 Companies With the Largest Market Cap
As of June 2023, these are the ten companies with the largest market caps. Note, too, that there isn’t always a direct correlation between market cap and stock price!
1. Apple
Apple, which trades under the market ticker AAPL, has a market cap of $2.9 trillion, and shares trade at more than $185. Apple is a tech company that produces consumer tech goods and software, including the iPhone. Its latest quarterly report (Q2 2023) showed revenue of almost $95 billion.
2. Microsoft
Microsoft trades under the MSFT ticker, and has a market cap of more than $2.5 trillion. Microsoft, like Apple, is a large tech company that creates software and hardware for businesses and consumers. Microsoft shares trade for nearly $340, and its latest revenue numbers tallied nearly $53 billion for the quarter.
3. Alphabet
Yet another large tech company, specializing in software and ad sales, Alphabet (the parent company of Google) has a market cap of more than $1.57 trillion. Alphabet trades under the GOOG ticker (it has numerous share classes), and shares trade for around $124. Its latest quarterly revenue was almost $70 billion.
4. Amazon
Amazon is an ecommerce company that sells just about everything under the sun on its digital platform, as well as offering cloud services to businesses. Amazon trades under the AMZN ticker, and has a market cap of $1.22 trillion, and shares trade for more than $125. Amazon’s latest quarterly revenue was $127 billion.
5. NVIDIA
NVIDIA makes computer chips, and has a market cap of $1.07 trillion, with share prices of around $434. NVIDIA trades under the NVDA ticker, and its most recent quarterly revenue was $7.19 billion.
6. Tesla
Tesla, an electric car maker, is not a mega cap stock, but close. Its market cap is $857 billion, with share prices of more than $270. It trades under the ticker TSLA, and saw revenue of $23.3 billion during Q1 2023.
7. Berkshire Hathaway
Berkshire Hathaway is a conglomerate holding company, meaning that it is involved in many industries, including real estate and insurance. It has many stock classes, but trades under the ticker BRK.A, and is valued at more than $516,000 (its other shares trade for significantly less). Its market cap is nearly $743 billion, and its latest quarterly revenue was more than $85 billion.
8. Meta
Meta is the parent company of Facebook, and trades under the ticker META. Its market cap is $726 billion, and shares trade for more than $283. Revenue for the first quarter of 2023 was almost $28 billion.
9. Visa
Visa is a financial services company, which most recently brought in quarterly revenue of almost $31 billion. Visa trades under the ticker V, and has a market cap of more than $466 billion, with shares trading for more than $227.
10. UnitedHealth Group
UnitedHealth Group is a healthcare and insurance company with a market cap of $437 billion. Shares are trading for nearly $470, and its latest quarterly revenue numbers amounted to $336 billion.
3 Pros of Investing in Mega Cap Stocks
There are several good reasons to consider making mega cap stocks part of your asset allocation strategy.
1. Diversification
Investing across different sectors and market capitalizations spreads out risk, since economic ups and downs may affect smaller, mid-sized and larger companies differently.
2. Stability
Established mega cap companies are among the most stable in the economy and may be better able to withstand a market downturn compared to smaller or newer companies without cash reserves or a solid brand reputation.
3. Dividends
Some mega cap stocks pay dividends to investors since they don’t need to reinvest profits into growth. That can provide an additional stream of income or allow for faster portfolio growth if they’re reinvested.
Cons of Investing in Mega Cap Stocks
While there are some things that make mega cap companies attractive to investors, it’s important to consider the potential downsides:
Limited Upside
Since many mega caps have already done most of their growing, there may be limited space for their share prices to increase.
Perception vs Reality
Market capitalization measures the stock market’s perceived value of a stock, not its intrinsic value. So mega cap status alone shouldn’t be considered a reliable indicator of a company’s fundamentals or financial health.
💡 Quick Tip: How to manage potential risk factors in a self directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.
How To Invest in Mega Caps
If you understand the investment risk and potential rewards that come with mega cap stocks and you’re interested in adding them to your portfolio, there are two ways to do it. You can choose to invest in individual mega cap stocks, or you can put money into an investment fund, such as a mutual fund or an exchange-traded fund (ETF) that holds mega caps.
You can also look at investing in a market index that can give your portfolio exposure to mega cap stocks.
Buying individual stocks allows you to pick and choose which mega caps you want to purchase. But this may require more of a hands-on approach as you’ll need to research individual companies. There are similarities and differences, in that regard, between investing in mega cap and investing in small cap stocks.
Investing in a thematic ETF focused on mega cap stocks may be a simpler way to diversify with larger companies. This allows you to have exposure to more mega cap stocks in your portfolio.
ETFs can be traded on an exchange, just like a stock, allowing for greater liquidity and flexibility than traditional mutual funds. Lower turnover ratios can make ETFs more tax-efficient than regular mutual funds. Depending on which mega cap ETF you choose, you may pay a much lower expense ratio than you would with traditional mutual funds.
Buying Stocks With SoFi
Mega cap stocks refers to stocks that have a market capitalization of more than $10 billion, and in some cases, more than $1 trillion. As of June 2023, there are only a handful of mega cap stocks out there, but several companies may become mega cap stocks in the subsequent years.
Mega cap stocks offer stability and the potential for dividend income, though they may have lower upside than smaller stocks that have more room to grow. The right role for mega cap stocks in your portfolio will depend on your investment goals, risk tolerance, and time horizon.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
FAQ
What are examples of mega caps?
Some examples of mega cap stocks include Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), and Amazon (AMZN), the first two of which have market caps of more than $2 trillion.
How many mega cap stocks are there in the U.S.?
Mega cap stocks are stocks with share prices of vastly more than $10 billion, and as such, there are many on the market – dozens, in fact. But there are only three or four with market caps of more than $1 trillion.
What is the difference between a large-cap and mega cap?
While mega cap stocks are typically defined as having market caps of more than $10 billion (often more than $200 billion), large-cap stocks have market caps ranging from $2 billion to $10 billion.
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