Stock size classification: For domestic A-share listed companies, Morningstar divides its shares into three categories according to the total market value: large, medium and small. The specific division criteria are as follows: arrange the stocks in descending order of their total market value, and calculate the percentage of the cumulative market value corresponding to each stock to the cumulative total market value of all stocks, Cum-Ratio, 0.
Small-cap stocks: stocks with a cumulative market value percentage greater than 90%, that is, stocks that meet Cum-ratio >; 90% 。
This definition is difficult to understand. One of the most important sentences is: "Arrange the stocks in descending order according to their total market value, and calculate the cumulative market value of each stock as a percentage of the cumulative total market value of all stocks."
Morningstar Company arranges all stocks in descending order of market value. If the stock market value is 5, 4, 3, 2, 1 respectively, it is 5, 9 (= 5+4), 12 (= 5+4+3), 14 (= 5+4+3+2), 65432. In this way, the market value of Cum-Ratio of each stock is 33%, 60%, 80%, 93%, 100% respectively. According to the classification of Morningstar, the first two (market value 5 and 4) are large, the middle one (market value 3) is medium, and the last two (market value 2 and 1) are small.
Let's look at the definition of Guangfa Small Cap:
Every six months, the China A-share market stocks are sorted and added according to the circulating market value from small to large, and the stocks with accumulated circulating market value reaching 50% of the total circulating market value are classified into the stock collection of small-market companies. According to the above example, the order from small to large is 1, 2, 3, 4, 5. Then the cumulative market value is 1, 3,6, 10, 15. The proportion of total market value is 6.6%, 20%, 40%, 66%, 100% respectively. Small-cap stocks are widely distributed. Small-cap stocks with market value of 1, 2 and 3 are large-cap stocks with market value of 4 and 5.
Due to different classification standards, in some cases, the large-cap stocks classified by Morningstar will be classified as small-cap stocks by Guangfa Small-Cap. Moreover, due to changes in the market, the market value of stocks will also change. The original small-cap stocks may appreciate to the broader market, which is the reason why Guangfa small-cap stocks throw out a large number of Hongdu aviation stocks, which is the so-called lively Hongdu incident. Because Xiaoguang defines that they must hold more than 80% of small-cap stocks, when small-cap stocks rise to large-cap stocks, they have to throw them out.
Small-cap stocks are difficult to invest, and smaller stocks are more difficult to invest. So I guess that Guangfa's small-cap investment is more on the limit of the small-cap defined by them, that is, the small-cap that is too big. This is also the reason why Guangfa small-cap stocks are often classified as large-cap stocks by Morningstar.