ALPHA-RESEARCH AND

INVESTMENT CLUB
Task 3:

What is market capitalization?

It is the total market value of a company’s share in dollar. It is equal to the number of shares
multiplied with the market value of 1 share and is used to calculate a company’s size. For instance, a
company with 100 shares selling at ₹10 a sharer would have a market capitalization of ₹1000.

What is the difference between large-cap, mid-cap and small-cap?

Large-cap companies have a huge market capitalization, of $10 Bn or more and they usually have
been around for a while in the market, and they are major players in well-established industries.
Such companies may or may not bear rewards for the investors in the short term, but over the long
run, these companies reward investors with a consistent increase in share value and dividend
payments.

Mid-cap are established companies which are in the process of expanding and are expected to
experience rapid growth. Their range is between $2 Bn and $10 Bn. They carry high risk as compared
to large-cap companies as they are aren’t much established, but they are attractive for their growth
potential.

Small-cap are generally young in age or serve niche markets and new industries. These companies
are considered a risky investment due to their age. The market they serve, and their size. Their
market capitalization lies between $300 million to $2 billion. These companies are more sensitive to
economic slowdowns because they have fewer resources.

Task 4:

List 5 major things you would look at before investing in a stock?

1. What does the company do - Before buying stocks I would try to have an in-depth
knowledge of how a company operates and where do they get their income from. I would
try to know as much as possible about the company before investing.
2. Price/Earnings Ratio – I would look to invest in a company with high P/E ratio and keep an
eye on a company with lower P/E ratio if it’s growing fast.
3. Beta – For a higher risk and a higher return, I’ll choose a company with Beta higher than 1,
but if I have to play safe, I'll go with Beta lower than 1.
4. Dividend – I’ll look for dividend rate and choose a company with high dividend rate because
that would imply the company is in a safe situation and has been earning a good amount of
money.
5. The Chart - If an investment's chart starts at the lower left and ends at the upper right, that's
a good thing. If the chart is heading down, I’ll stay away and won’t try to figure out why.