How we categorise the companies traded on the LSE in terms of capitalisation

[TheMotorcycleBoy]

Hi everyone,

I'm pondering this, since in the news right now is discussion of M&S's relegation from the FTSE100, and also I'm quite interested in watching (or at least an awareness of) companies which are about to be promoted.

What I've been looking for is a listing of the various LSE equity markets, (FTSE100, FTSE250, FTSE350, AIM etc.) and what (if any) is the entry level of market capitalisation that a firm must have prior to entry (or promotion) to that particular market.

e.g. does a firm require a capitalisation of 2 billion+ GBP to be in the FTSE100?

I just found this page
http://www.ftse.com/products/indices/uk

(and half way down there is a link to "factsheets" which if you click "see all" then leads to
http://www.ftse.com/Analytics/factsheets/Home/Search)

however I just clicked the FTSE 100 index link (on the fact sheet listing on the first link I referred to) and that took me to this pdf
http://www.ftse.com/Analytics/Factsheet ... a69e28.pdf

at the bottom of the pdf there is a table (called "Index characteristics" ), which I believe is listing it's figures in terms of GBPm, and it states

Smallest 2,219

So does that means the mark cap of the smallest valued firm in the FTSE 100 is currently 2.2B?

Anyone know of a simpler resource for describing LSE traded equity markets in terms of each constituents Market Cap.?

many thanks
Matt (and Mel)

[Itsallaguess]

Anyone know of a simpler resource for describing LSE traded equity markets in terms of each constituents Market Cap.?

Does this help?

It gives the whole FTSE all-share listing by market cap, but helpfully includes the break-points between the various sub-indices -

FTSE All-Share Index Ranking (unofficial guide) - as at close on Wed, 23 May 2018

http://www.stockchallenge.co.uk/ftse.php

As with any free resource, you should carry out a good level of sanity-checking before using any of the information for investment purposes...

Cheers,

Itsallaguess

[Gengulphus]

Membership of the main indices is done on a somewhat complex set of rules that have some bias towards leaving membership as it is - basically, a company that is already in the index needs a lower market cap to remain in the index than one that is not already in the index requires to be promoted into it.

The effect of those rules for the FTSE 100 is roughly that at each quarterly review:

* Companies that are in positions 1-90 in the high-to-low market cap list are guaranteed to end up in the index - they'll stay in if already in, and be promoted if not.

* Companies that are in positions 91-100 in that list are guaranteed to stay in the index if they're already in it, but not guaranteed to be promoted to it if they're not. Such companies will only be promoted to the index as needed to get the number of companies in it back up to 100 after other changes have reduced their number below 100.

* Companies that are in positions 101-110 in that list are guaranteed to remain out of the index if they're not already in it, but not guaranteed to be relegated from it if they are in it. Such companies will only be relegated from the index as needed to get the number of companies in it back down to 100 after other changes have increased their number above 100.

* Companies that are in positions 111 and above in that list are guaranteed to end up outside the index - they'll stay out if already out, and be relegated if not.

The rules do basically imply that at each review, there is a threshold market cap above which a company is promoted and a lower threshold market cap below which a company is relegated, with companies between the two staying where they are. But the only sensible way to determine those two thresholds is to apply the exact rules to determine which companies are relegated and promoted, then see what those promotions and relegations say about where the thresholds effectively are. Trying to do it in the opposite order - i.e. calculate thresholds first, then use them to determine which companies get promoted and relegated - simply doesn't work because there are no formulas for the thresholds.

That's only a rough description - if you want the full gory details, the link you want is http://www.ftse.com/products/downloads/ ... es.pdf?414.

Gengulphus

[TheMotorcycleBoy]

Thanks to both of you. This is was particularly good:

http://www.stockchallenge.co.uk/ftse.php

It's plain to see that who ever bought any OCADO shares before early May has made some money.

[DiamondEcho]

+1 for StockChallenge a site I've kept an eye on for a few years. Can be very useful if you have a stock hovering in the promotion/relegation zone.

[johnhemming]

Thanks to both of you. This is was particularly good:

http://www.stockchallenge.co.uk/ftse.php

It's plain to see that who ever bought any OCADO shares before early May has made some money.

You have only made a profit when you have sold the shares. Otherwise you have a potential profit, but it could go away. Ocado have a market capitalisation something like 4* their turnover. Yes if they can grow their turnover and margin it could be worthwhile, but as it stands they are in break even or even making a loss. Comparing them to Amazon may have merit, but I wouldn't myself.

[TheMotorcycleBoy]

You have only made a profit when you have sold the shares. Otherwise you have a potential profit, but it could go away.

I did research ocado briefly, and to be honest, they don't look like the kind of long term investment we'd want to be in. For a speculator, you could maybe make a quick buck, but that's certainly not what we are doing.

Ocado have a market capitalisation something like 4* their turnover.

Ah...yes...I just checked them out:

http://www.4-traders.com/OCADO-GROUP-PL ... inancials/

Turnover = 1659M
Market cap = 6061M
mc/sales = 3.65

Thanks for that John. Another figure to consider when shopping around. What kind of ratios do you look for? Of course appreciating that some sectors will be a lot more capital intensive than others.

thanks Matt

[johnhemming]

The theory of investing in such companies is that their income will grow.

[Elenax]

I am also using the stock challenge for quite a while now and its a really good resource

[TheMotorcycleBoy]

The theory of investing in such companies is that their income will grow.

And by that, does the markcap/turnover ratio fall?

[johnhemming]

It helps (particularly with equity) to think of the value of a business. The value of a business relates to the profits that it makes. However, if you merely value something as at today then you might miss out on potential future profits.

All of the figure are really attempts to quantify this and then responding to market trends (ie if lots of people buy something generally its price goes up and vice versa).

[TheMotorcycleBoy]

Sorry still trying to figure out more. So the FTSE100 and FTSE250 are disjoint collections of firms, and the FTSE350 is the amalgamation of those 2 collections.

And the FTSE small cap is another discrete set, and the FTSE All share index equals the unions of the FTSE350 and FTSE small cap.

And the FTSE AIM and FTSE fledgling are other separate collections of PLCs.

Matt

[Alaric]

So the FTSE100 and FTSE250 are disjoint collections of firms, and the FTSE350 is the amalgamation of those 2 collections.

In all these cases, it's what you need to build a portfolio index. So for each company, you take the number of shares in issue (sometimes adjusted downwards to what's termed "the free float" and multiply by the price. You then sum up the total value and relate it to the total value at some time in the past to give an index value.

https://en.wikipedia.org/wiki/FTSE_100_Index