Tuesday, November 25, 2014 4:53:06 PM
What your explanation lacks is any discussion of position sizing at a fund. If a fund wants MARA to account for a 2% position of the fund, then you don't think it matters what the market cap of the company is? Buying 2% of a $100M market cap company is one thing, but buying 2% of a $200M market cap company is different. In the latter example, only half as many shares need to be purchased to hit the same 2% weighting as in the former example. Why? Because the underlying market cap of the company has increased, and to that specific fund, MARA trading 50k shares/day at $15 is tougher to justify than if it trades 50k shares/day at $30. So the underlying market cap of a company does matter.
So when you say "The daily trading value is irrelevant if they can't buy any shares and even get a position", this simply is not correct.
And when you say "yes the value dollar of the trading is higher, but that has no affect on liquidity whatsoever", that is also simply not correct.
And your next sentence: "In theory then, you would in essence be suggesting a fund manager more likely to buy stock in a company whose stock traded just 5000 shares at $100 than a company whose stock traded 50,000 at $10. Which one is more liquid by definition, clearly the latter"
I'm not saying he's more likely to buy shares of the $100 stock, but I am saying that the fund manager would be/should be indifferent. It's the same underlying position to the fund manager because those are equivalent market caps. He's not trying to buy the same number of shares of the company in your $10 or $100 stock example, he's looking to buy the same "market value" of the company. In the $100 stock example, he only has to buy 1/10 of the number of shares he does in the $10 stock example. To look past this point is a mistake, but yet you say daily trading value doesn't matter.
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