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By Market News Video Staff, Monday, November 14, 4:38 PM ET
Play Video: The Importance Of Market Cap

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In the latest look at the underlying components of the S&P 500 ordered by largest market capitalization, Essex Property Trust Inc (NYSE:ESS) has taken over the #302 spot from TransDigm Group Inc (NYSE:TDG), according to The Online Investor. Click here to find out the top S&P 500 components ordered by average analyst rating

Market capitalization is an important data point for investors to keep an eye on, for various reasons. The most basic reason is that it gives a true comparison of the value attributed by the stock market to a given company's stock. Many beginning investors look at one stock trading at $10 and another trading at $20 and mistakenly think the latter company is worth twice as much that of course is a completely meaningless comparison without knowing how many shares of each company exist. But comparing market capitalization (factoring in those share counts) creates a true "apples-to-apples" comparison of the value of two stocks. In the case of Essex Property Trust Inc (NYSE:ESS), the market cap is now $14.42 billion, versus TransDigm Group Inc (NYSE:TDG) at $13.47 billion.

Below is a chart of Essex Property Trust Inc versus TransDigm Group Inc plotting their respective size rank within the S&P 500 over time (ESS plotted in blue; TDG plotted in green):

Below is a three month price history chart comparing the stock performance of ESS vs. TDG:

ESS,TDG Relative Performance Chart

Another reason market capitalization is important is where it places a company in terms of its size tier in relation to peers much like the way a mid-size sedan is typically compared to other mid-size sedans (and not SUV's). This can have a direct impact on which mutual funds and ETFs are willing to own the stock. For instance, a mutual fund that is focused solely on Large Cap stocks may for example only be interested in those companies sized $10 billion or larger. Another illustrative example is the S&P MidCap index which essentially takes the S&P 500 index and "tosses out" the biggest 100 companies so as to focus solely on the 400 smaller "up-and-comers" (which in the right environment can outperform their larger rivals). So a company's market cap, especially in relation to other companies, carries great importance, and for this reason we at The Online Investor find value to putting together these rankings daily.

According to the ETF Finder at ETF Channel, ESS and TDG collectively make up 1.90% of the iShares Morningstar Mid-Cap Growth ETF (JKH) which is up by about 0.3% on the day Monday.

See what other ETFs contain both ESS and TDG
See what other stocks are held by JKH

At the closing bell, ESS is up about 2.2%, while TDG is down about 7.1% on the day Monday.

This Article's Word Cloud:   Another   Below   ETFs   Essex   Group   Investor   Market   Monday   NYSE   Online   Property   TransDigm   Trust   about   apples   billion   capitalization   chart   companies   company   comparing   comparison   components   example   fillColor   find   important   index   investors   larger   look   market   much   mutual   ordered   other   over   plotted   reason   relation   size   solely   stock   stocks   that   their   those   trading   value   which
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