How to Narrow Down the Best ASX Stocks to Buy

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Let’s take a look at some of the metrics.

To start, here’s one way you can narrow down the vast number of companies that are publicly traded on the ASX.

The first stock-screening metric I want to introduce to you is Market Capitalisation.

Market capitalisation, or market cap, is the result from taking the current share price and multiplying it by the number of shares on issue.  

This is used by investors to determine the size of a company.

You can use this as a filter to look at smaller companies or larger companies.

They range from Micro Cap to Large Cap.

Let me give you a quick and broad overview of how stocks fall into different categories for the Australian market…

Micro Caps are companies below $50 million…

Small Caps are between $50 and $500 million…

Medium Caps are between $500 million to $2 billion…

Large Caps are $2 billion to $150 billion

A ‘micro Cap’ is typically the riskiest due to its small size and,usually, unproven business model and uncertain cashflow.

While a Large Cap stock, like BHP or CBA, are regarded as much more mature businesses. Unless something goes drastically wrong, it’s harder for a company this size to go out of business. Although it’s important to remember that they still have risks.

Cheers,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch