Groww Digest

6 Day Course

Theme: ways of categorizing stocks

Dec 5 to Dec 11, 2022

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series, Groww Digest - all things personal
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Day 1: Monday
6 Day Course | Theme: ways of categorizing stocks

Stocks can be categorized in many ways. This

week, we’ll explore some of the types.

Remember, one stock can be a part of many

different categories.

Small, mid, and large-cap stock: this is when a

stock is categorized based on how big the
company is. In India, large = 100 biggest
companies; mid = 101-250 biggest companies;
small = 251 and beyond.

Growth vs value stock: growth stocks are

stocks of companies that are growing
aggressively. On the other hand, value stocks
are stocks that are underpriced — as in, the
stock is cheaper than what it should be (this is
subjective).

Growth vs value is a polarising topic among

investors. Some swear by growth while some
swear by value investing.

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Day 2: Tuesday
6 Day Course | Theme: ways of categorizing stocks

Dividend vs non-dividend stocks: some stocks

are famous for giving regular dividends while
some don’t give dividends at all.

Do note, giving dividends is optional. A

company that has never given dividends can
start giving dividends. A company that always
gives dividends can also stop it.

Bluechip stocks: basically the same as

large-cap stocks.

In India, that means the 100 biggest

companies on the stock markets. In the US,
this means 500 biggest companies on their
stock market.

Penny stocks: when the price of each stock is

below Rs 10 in India and below $1 in the US.

Do note, just because a stock is a penny stock

does not mean it is a good or bad investment.

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Day 3: Wednesday
6 Day Course | Theme: ways of categorizing stocks

Common stock vs preferred stock.

A company can have different kinds of stocks

also.

A preferred stock are stocks that usually has

more benefits and privileges than a common
stock.

These could be things like priority in getting

money upon company dissolving, dividend
sharing, and voting power.

Preferred stocks are a common way company

founders retain control of their companies
even when owning a smaller percentage of
the company.

Google and Facebook are two examples

where there are common and preferred stock
available.

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Day 4: Thursday
6 Day Course | Theme: ways of categorizing stocks

Domestic and international stocks.

Speaking technically, this is very easy to categorize.

Any company headquartered in India is a domestic

company and the others are international.

But that is oversimplifying it.

Domestic stocks are companies that operate within India.

Most or all of their revenue and income comes from
within India.

International stocks are companies that operate and earn

revenue from multiple countries — doesn’t matter if their
headquarters is in India or abroad.

Example: SBI is largely an Indian or domestic company.

They have very few branches outside India. The few

branches located outside India do not contribute much to
SBI’s revenues.

On the other hand, Tata Consultancy Services (TCS) is very

much an Indian company — but it isn’t a domestic
company at all.

It has customers across the world — and hence is an

international stock.

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Day 5: Friday
6 Day Course | Theme: ways of categorizing stocks

Cyclical and non-cyclical stocks.

Certain parts of any country’s economy and

even the entire globe’s economy operates in
cycles of ups and downs.

Stocks of companies that are directly affected

by such cycles are called cyclical stocks.

Example: fertiliser stocks. The stocks often

tend to do better before and during the rainy
season every year.

On the other hand, there are non-cyclical

stocks. These are more evergreen in nature.

Example: FMCG stocks are usually a lot less

affected by small economic cycles.

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Day 6: Sunday
6 Day Course | Theme: ways of categorizing stocks

We’ve reached the end of this week’s course

that started on Monday.

Here’s a test you should take. Get pen and

paper!

Question 1:
A company called XYZ is the 121st largest
company in India by market capitalization.
This is a:

-Large-cap company
-Mid-cap company
-Small-cap company

Question 2:
For dividend stock companies, giving
dividends is mandatory.

-True
-False

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Day 6: Sunday
6 Day Course | Theme: ways of categorizing stocks

Question 3:
Which kind of stock usually has more voting
power?

-Common
-Preferred

Question 4:
International stocks are of companies that:

-Are headquartered outside India

-Operate and earn revenue from outside India

Question 5:
Fertilizer stocks are an an example of

-Cyclical stocks
-Non-cyclical stocks

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Day 6: Sunday
6 Day Course | Theme: ways of categorizing stocks

Answers:

Q1: Mid-cap company;

Q2: False;
Q3: Preferred;
Q4: Operate and earn revenue from outside
India;
Q5: Cyclical stocks.

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 That’s it for this week!

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See you next week!

—Groww Digest Team

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