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Types of Stocks – How Many Types of Stocks Are Out There?

 

Joint stock companies, limited partnerships whose capital is divided into shares, and institutions established by special laws may issue stocks, which are valuable investment instruments to their investors in proportion to their shares in the company, pursuant to the approval of the regulator institution. The stock market can be one of the paths to financial success for investors. If the shares to be invested in are determined as a result of a comprehensive research, the probability of profit increases. So, what reference points must be considered before searching for good stocks? What stock options are out there?

 

Common Stocks

 

Around the world, most of the stocks people invest in are common stocks. Common stock represents ownership only in a specific part of a company, and shareholders have certain basic rights, such as receiving dividends, voting on the company's board of directors, participating in corporate governance, and receiving information about the company's activities. Even in the event of a dissolution of the Company, common shareholders retain the right to receive an interest proportional to the value of the remaining assets. Unless otherwise specified in the Articles of Association, common shares give equal rights to all holders.

 

Preferred Stocks

 

Preferred stocks, also known as golden stocks, confer more privileged rights on their holders than common shares. The distribution of a special dividend is one of these privileges. Holders of preferred stocks can receive dividends earlier than holders of common shares.

 

Stocks by Market Value

 

Shares can be classified according to their market value, i.e. the total value of all their shares. The shares of companies with the largest market capitalization are called large-cap shares. On the other hand, the shares of companies with relatively low market value are also traded on the stock exchanges, called small-cap shares. There are also mid-cap stocks that fall between these two categories.

We cannot speak of the existence of a specific dividing line between these categories. Moreover, the values of the companies traded on each country's own stock exchanges will vary. However, on the world's stock exchanges, the general opinion is that stocks with a market value of $10 billion and above should be accepted as large cap. While shares with a market value between $2 billion and $10 billion belong to the medium capital class, the shares of companies with a market value of less than $2 billion are considered small capital.

While large-cap stocks are considered a safer and more conservative investment option, stocks of mid-cap and small-cap companies may have greater return potential but are associated with higher risk. However, the fact that a company is large or small does not mean that its shares will perform similarly to the shares of that group.

 

Growth Stocks and Value Stocks

 

Growth stocks, as the name suggests, refer to shares of companies that are expected to grow faster than others. In general, growth stocks tend to perform more successfully when a country's economy is growing and interest rates are low. Technology stocks can be cited as an example.

Value stocks, on the other hand, can be defined as rather safe investment instruments. In this category are shares of large-capitalization and well-known companies that have become industry leaders and therefore do not have high growth potential. Companies operating in sectors such as finance, healthcare and energy belong in this category, as they offer a stable and reliable source of income.

 

Public Stocks

 

A public offering is a corporation or partnership offering for sale a portion of its stock to increase its capital and announcing this to stock market investors through a call or announcement.

Public offering announcements are often made through the written and visual media, and the company's financial statements and other important information are made available to the public. Based on this information and the public offering price, investors may decide to invest in that stock.

Public stocks are securities that have recently been traded on the stock exchange through an initial public offering. A share usually retains its IPO status for at least one year. Public Offering Shares are financial assets that are of great interest to stock market investors. Investing in the right IPO share at the right time can be extremely lucrative in the long run.

 

Dividend stocks and non-dividend-paying stocks

 

A dividend is a payment distributed to the shareholders of a company in proportion to their share in the company's profits. Dividends are paid through the company's net income or from reserves set aside for dividend payments. In the case of stock corporations, the Annual General Meeting decides on the distribution of dividends.

In order for a shareholder to be entitled to a dividend, he or she must hold the relevant shares on the dividend distribution date set by the Company's Annual General Meeting. Dividend distribution dates of companies may vary.

Many stocks offer regular dividends to their shareholders. Dividend stocks are often preferred investment products because dividends provide a valuable source of income for investors.

Not every company pays dividends. Some of the largest companies in the world do not even pay dividends. Still, these types of stocks can make money for their investors thanks to their rising value. Investor motivation in recent years indicates a greater interest in dividend stocks.

 

Cyclic Stocks and Non-Cyclic Stocks

 

Cyclical stocks refer to stocks from sectors or companies that are very sensitive to the general economic cycle and are directly and strongly affected by economic performance. The performance of these stocks is expected to be in the form of increases, decreases and fluctuations in parallel with the peak, recession and recovery phases of the economy.

In a market environment with strong economic growth, such stocks are likely to perform better than others. Conversely, in times of recession, when economic indicators are alarming for some reason, the decline in value of these stocks may be more shocking than others.

One example of cyclical shares is airline shares. As a natural consequence of the fact that air tourism is a sector that has been severely affected by almost every economic and financial crisis worldwide, the shares of these companies can also experience sharp declines in such times. However, they are likely to make strong upward moves alongside economic recovery signals.

Non-cyclical stocks are a term for stocks that are less sensitive to general economic data, indirectly affected by the economy, or even move in the opposite direction of the general economic outlook. Stocks of companies that produce core products and services fall into this category.

Non-cyclical stocks can also do better than average as a result of the search for a safe haven, especially in times of economic recession and uncertainty. Examples of cyclical stocks include shares of companies operating in the food, healthcare and defense sectors.

 

Blue Chip Stocks

 

Blue chip stocks refer to shares of well-established companies that have a large market value and are leaders in their fields of activity. Blue chip stocks often do not have high yields, but the strong institutional and financial structures of the companies behind them make these stocks a stable financial investment product. As a result, they are often preferred by long-term equity investors. Blue chip stocks tend to perform well, especially in times of economic uncertainty.

Examples of blue-chip stocks include shares of computer giants such as Microsoft, Google and Intel, global medical companies such as Pfizer and Johnson & Johnson, and leading retailers such as Unilever and P&G.

Blue chip stocks will be particularly important when building a long-term investment portfolio. These stocks are extremely popular financial investments among investors who want to protect their capital or who expect relatively low but stable returns.