Table of Contents
What are mega cap stocks?
Investing in mega cap stocks
6 examples of mega cap stocks
Potential benefits of mega cap stocks
Risks of mega cap stocks
The bottom line
Oct 17, 2022
7 min read
Mega-cap stocks usually offer a proven track record, stability, and potential dividend payouts, investing in them can help protect investors against downturns in the market.
Mega cap stocks are shares of the largest companies in the investing world, generally defined as those businesses with market capitalizations of more than $200 billion. At the other end of the spectrum, small cap companies are generally valued between $300 million and $2 billion. Medium cap, or mid cap, companies have a market value up to $10 billion, and large cap companies have a market value of $10 billion or more.
Knowing a company’s market cap allows investors to compare and rank companies by size, and to gauge the performance of a stock or portfolio against an index of companies with a comparable range of market caps—a process called benchmarking. Stocks with the highest market caps are mainly tech companies, such as Apple, Amazon, and Microsoft, but there are also mega cap stocks in other industries such as health care, consumer goods and energy.
Mega cap is a designation for the largest companies in the investment world, measured by their market capitalization. Market cap is calculated by multiplying the company’s total number of shares outstanding by its current share price. That means that a company’s exact value may change with market conditions. As of mid-2022, more than 40 companies in the world had reached mega cap status.
Many of these companies have globally recognized brands and tend to have stable revenue, earnings, and, in some cases, dividends. Mega cap stocks are generally considered safer investments than their smaller counterparts because the companies are more established, but they may not have the same returns or growth potential.
Investors can buy mega cap stocks as individual shares of stock, or they can put money into an investment fund that holds these stocks. Mutual funds, index funds, and exchange-traded funds (ETFs) may buy mega cap stocks or track a mega cap index. The CRSP U.S. Mega Cap Index, for example, is an index that replicates the performance of the largest U.S. companies.
Investors who want a more hands-on approach may choose which individual stocks they want to buy. While this method allows for more control, it also means the investor has the responsibility of performing the necessary research on individual companies.
Investing in a fund that holds or tracks mega cap stocks is the route most individual investors take. Investors could research ETFs and mutual funds that hold mega cap stocks, choose a fund, and buy shares in it. The investor would immediately gain exposure to multiple securities, including mega cap stocks.
Some investors prefer ETFs because they can be quickly traded on a stock exchange, which offers liquidity. They tend to have little turnover in the basket of securities they hold, which makes them more tax-efficient compared to many mutual funds. Additionally, investors can compare expense ratios, or how much the fund manager charges as a percentage of the assets in the fund, and choose a fund that’s low-cost.
Try Titan’s free Investment Calculator to project your potential investment returns.Learn More
Mega cap stocks include some of the most recognizable companies. While shares of most mega cap stocks fell during the first half of 2022 when the stock market entered a bear market, many maintained their status as mega cap. Some also saw a rise in revenue during this time. Some of the best-known mega cap stocks include:
In 2018, Apple was the first U.S. exchange-listed company to reach a $1 trillion market capitalization. As of early September 2022, it had a market cap of about $2.5 trillion and was the largest public company in the world. Although Apple’s stock price fell by about 23% in the first half of 2022, the decline was smaller than for several other tech giants. Despite the slide in stock price, Apple posted record revenue of $83 billion in the fiscal third quarter ended in June 2022.
Pfizer, a global pharmaceutical company and the biggest maker of COVID-19 vaccines, had a market cap of about $258 billion as of early September 2022. In the first half of 2022, Pfizer’s shares fell about 11%, about half the decline of the broader market, while revenuerose 60% to $53 billion.
Merck is one of the largest drugmakers in the world and had a market cap of about $220 billion as of mid-2022, a period when the shares rose almost 21%, far outpacing the rest of the market. In the first half of 2022, the company’s revenue rose nearly 40% to more than $30 billion.
Meta Platforms, which was formerly named Facebook, is a technology conglomerate with a market cap of about $425 billion. Although the company earned more than $39 billion in 2021, in the first half of 2022 the shares lost more than half their value. Revenue rose less than 3% in the first six months of 2022 to $57 billion and profit fell by 29%.
The world’s largest online retailer has a market cap of about $1.3 trillion. In the first half of 2022, its shares fell by about a third and first-half sales growth slowed to just 7%, or a total of $238 billion.
The electric-vehicle maker and clean energy company had a market cap of $860 billion as of early September 2022. In the first half of the year, Tesla’s shares fell more than 30% though sales surged 60% to almost $36 billion.
Investing in mega cap stocks has a number of potential advantages, including:
Mega cap companies are large and tend to have well-established businesses, so they’re more likely to have stable revenue and earnings and less fluctuation in their share prices. They’re also less likely to have major financial setbacks or go bankrupt. Some investors feel that investing in companies with a strong, long-term history is less risky.
Large, stable companies are more likely to pay dividends to their shareholders because they don’t need to reinvest profits into growth.
Like all publicly traded companies, mega caps are required to regularly submit financial statements to the SEC, which makes it easy for investors to find and analyze public information about them. But they often go a step further and make presentations to investors that provide even more insight into their businesses and performance.
Because mega cap companies have the financial resources to back groundbreaking initiatives, their stock prices sometimes have large gains. A mega cap company may also be better able to absorb losses, raise capital, borrow and survive recessions.
Investing in mega cap stocks, however, has potential disadvantages, including:
Mega cap stocks tend to have lower growth potential compared to some smaller companies that are still expanding and taking business from rivals or creating a market for innovative products or services.
Small cap companies tend to outperform large cap companies during certain periods, such as when the Federal Reserve lowers interest rates to stimulate the economy.
Market capitalization measures the stock market’s perceived value of a stock, and it typically understates a company’s total value. So market cap isn’t always a reliable indicator of a company’s financial health.
Mega cap stocks may come from any sector, but they’re highly concentrated in tech. Investors who put their money only in mega cap stocks may not achieve the level of diversification many investors seek when trying to spread risk.
As heavyweights in the investing world, mega cap stocks usually offer a proven track record, stability, and potential dividend payouts. The biggest downside is that the companies behind these stocks may not expand as quickly as smaller or newer companies with more room to grow. But investing in mega cap stocks can help protect investors against downturns in the market because the biggest companies often have the financial resources to withstand business reversals or economic downturns.
At Titan, we are value investors: we aim to manage our portfolios with a steady focus on fundamentals and an eye on massive long-term growth potential. Investing with Titan is easy, transparent, and effective.
Get started today.
Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Titan has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Titan has not reviewed such advertisements and does not endorse any advertising content contained therein.
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any strategy managed by Titan. Any investments referred to, or described are not representative of all investments in strategies managed by Titan, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.
Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see Titan’s Legal Page for additional important information.
You might also like
What Is a Meme Stock and How Does a Stock Become One?
Meme stocks are a new phenomenon that emerged during the COVID lockdowns in which retail investors buy and sell shares of beaten-down companies. Find out more here.
What Are Micro Cap Stocks?
Microcap companies are businesses with market capitalizations of $300 million or less. Their stocks may offer high growth potential, but they may also have low liquidity.
25 Mid Cap Companies to Watch Out For
Mid-cap companies fall between their small and large capitalization counterparts with market values of roughly $2 billion to $10 billion. Here are 25 to watch out for.
What Are Mid-Cap Funds & How Do They Work?
Mid-cap companies are often less well-known than their larger counterparts, but they have benefited from successful business plans that can reward investors.
© Copyright 2023 Titan Global Capital Management USA LLC. All Rights Reserved.
Please refer to Titan's Program Brochure for important additional information. Certain investments are not suitable for all investors. Before investing, you should consider your investment objectives and any fees charged by Titan. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. Brokerage services are provided to Titan Clients by Titan Global Technologies LLC and Apex Clearing Corporation, both registered broker-dealers and members of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA's BrokerCheck.
Various Registered Investment Company products (“Third Party Funds”) offered by third party fund families and investment companies are made available on the platform. Some of these Third Party Funds are offered through Titan Global Technologies LLC. Other Third Party Funds are offered to advisory clients by Titan. Before investing in such Third Party Funds you should consult the specific supplemental information available for each product. Please refer to Titan's Program Brochure for important additional information. Certain Third Party Funds that are available on Titan’s platform are interval funds. Investments in interval funds are highly speculative and subject to a lack of liquidity that is generally available in other types of investments. Actual investment return and principal value is likely to fluctuate and may depreciate in value when redeemed. Liquidity and distributions are not guaranteed, and are subject to availability at the discretion of the Third Party Fund.
The cash sweep program is made available in coordination with Apex Clearing Corporation through Titan Global Technologies LLC. Please visit www.titan.com/legal for applicable terms and conditions and important disclosures.
Cryptocurrency advisory services are provided by Titan. Cryptocurrency trading is provided by Bakkt Crypto Solutions LLC ("Bakkt Crypto"). Bakkt Crypto is not a registered broker-dealer or a member of SIPC or FINRA. Cryptocurrencies are not securities and are not FDIC or SIPC insured. Bakkt Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. Cryptocurrency execution services are provided by Bakkt Crypto (NMLS ID 1828849) through a software licensing agreement between Bakkt Crypto and Titan. Please ensure that you fully understand the risks involved before trading: bakkt.com/disclosures.
Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
Contact Titan at email@example.com. 508 LaGuardia Place NY, NY 10012.