So, one way to think about it would be, Microsoft MSFT has about a $1.7 trillion market cap.

And so those mega-cap stocks mathematically-just a small percentage move in any one of those individual companies is really going to be a huge movement compared to relatively small companies. And when I think about how we mathematically calculate our fair value of the marketplace, we take a composite of the intrinsic valuation of the companies that we cover, and we compare that to a composite of the market cap of the entire universe of stocks in the Morningstar index. I mean, they really do have an outsized influence on the performance of the market, right?

The only thing is, I'd note that now with as much as the market has sold off year-to-date, probably $200 billion is going to be closer to that right threshold to consider a mega-cap stock.ĭziubinski: So, let's talk about why mega-cap stocks and identifying them is somewhat important. But for myself, when I was coming up with those mega-cap stocks, I used $250 billion of equity market cap as our threshold. What makes a stock a mega-cap stock?ĭave Sekera: Well, it's one of those terms that can mean different things to different people in the industry. So, Dave, let's start out by defining our terms. Market Strategist, Dave Sekera, to find out if there's opportunity among mega-cap stocks today. By the end of the third quarter of 2022, many of these stocks had sold off dramatically. Many so-called mega-cap stocks were trading well above what Morningstar's analysts thought they were worth. At the start of 2022, we were warning investors about the price risk inherent in some of the market's largest names. Susan Dziubinski: Hi, I'm Susan Dziubinski with Morningstar.

Amazon stock, Meta Platforms stock, and Alphabet stock are trading at a significant discount to what we think the stock is worth.

In our view, some mega-cap stocks were far overvalued coming into the year, so it's not a surprise to see how much of these stocks have really sold off year to date.

For a stock to be considered a mega-cap stock, a company would need around $200 billion of equity market capitalization.

Dnote market cap