Large-cap stocks are typically from companies worth more than $10 billion. “Large-cap stocks are generally safer but slower growing than other classes,” says Asher Rogovy, chief investment officer at investment advisory firm Magnifina in New York City.
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“Currently, there are alarming signs of speculative bubbles across a variety of higher risk assets. Today, investing in value stocks rather than growth stocks might be most appropriate. Here are some timely quotes for several classes of stock:
Large-Cap vs Mid-Cap vs Small-Cap:
Large-Cap stocks are generally safer but slower growing than other classes, these stocks typically represent observable value. Small-Cap stocks generally represent a lucrative (yet risky) growth opportunity as it’s quicker to grow from small-cap to mid-cap than from mid-cap to large-cap.
Domestic vs International:
Many domestic stocks derive a significant share (50-80%) of revenue from international operations. Such companies will be less sensitive to the US economy and can partially hedge against a declining dollar.
Growth vs Value:
Growth stocks are valued based on how quickly their business is growing each quarter. Value stocks are valued based on more stable and predictable financial results. Many growth stocks appear to be in a speculative bubble, which means that value stocks could outperform in the near-term.
On average, IPO stocks don’t outperform market indices in their first year of trading. Of course this excludes the nearly guaranteed profit between the IPO price and first market trade. Finally, investment bankers love to schedule IPOs at a time when market valuations are high. They may be fun to watch, but should be analyzed and valued just like any other stock. (Source: https://www.dimensional.com/us-en/insights/ipos-profiles-are-high-what-about-returns)
Dividend vs Non-Dividend vs Income:
Stocks that pay dividends tend to be large-cap and/or value stocks. With today’s interest rate environment, dividend stocks are a more appealing alternative to bonds despite the added risk. Some stocks that pay income may distribute it as something other than a dividend, which may have tax consequences.
Cyclical vs Non-cyclical:
Cyclical stocks correlate with variations in overall economic activity, while non-cyclicals tend to remain steady despite economic conditions. The economic consensus is that we are on the brink of an economic surge related to the end of the Covid-19 pandemic. However, this effect may already be priced-in to most cyclical stocks.”