I'm just thinking big here,
say you find an undervalued stock with market cap of 100m,
what is the maximum you should buy considering you might have trouble exiting in the future ?
Also, how do the hedge funds trade them practically?
over a period of days and weeks?
Thank you for the feedback especially from experienced big investor
(24-10-2012, 10:28 AM)ikur1 Wrote: [ -> ]I'm just thinking big here,
say you find an undervalued stock with market cap of 100m,
what is the maximum you should buy considering you might have trouble exiting in the future ?
Also, how do the hedge funds trade them practically?
over a period of days and weeks?
Thank you for the feedback especially from experienced big investor
Let's dream big here since i am not big investor
IMO, first of all, to avoid mandatory general offer been triggered, your investment should capped at 30% i.e. 30m
Let's assume for whatever reason(s), you want your future transactions remain private as minority instead of substantial shareholder, the cap will become 5% i.e. 5m
Lastly, the amount to invest should also depend on your fund which serve another cap.
You need to look at average daily trading volume and past historical day trades in order to build up your desired position.
For sure, you dont want to bid up an illiquid stock just to enter
but what is the actual execution method?
i mean for a 100m cap stock for example and you've decided to invest 5m on it.
how long will it take and with the typical low liquidity, how do the funds do it really?
(26-10-2012, 11:14 PM)ikur1 Wrote: [ -> ]but what is the actual execution method?
i mean for a 100m cap stock for example and you've decided to invest 5m on it.
how long will it take and with the typical low liquidity, how do the funds do it really?
Fund will not touch on low liquidity and low cap stocks
Quote:Quote: (27-10-2012, 10:54 AM)CityFarmer Wrote: [ -> ] (26-10-2012, 11:14 PM)ikur1 Wrote: [ -> ]but what is the actual execution method?
i mean for a 100m cap stock for example and you've decided to invest 5m on it.
how long will it take and with the typical low liquidity, how do the funds do it really?
Fund will not touch on low liquidity and low cap stocks
i use to own very low liquidity stock APB maybe 20 years ago. If only i have the patience to treat this stock as a "Bond" and collect dividend until now. But i decided not to hold or buy any low liquidity stocks since i manage to sell APB at that time. Then, i had this thinking that i liked to sell my stocks anytime i chose. i still have the same thinking. Therefore i won't buy low liquidity stocks no matter how "attractive".
If i ever buy low liquidity stock again, i will treat it as a "Bond".
Low liquidity, low cap? You want to buy? It seems like double whammy
to me.
Shun low liquidity and low cap stocks? - Hmm, the first missed opportunity that came to my mind was VICOM (and boy, do now i regret).
Yes, low liquidity stocks are harder to sell, but for retail investors or compared to other assets like real estate, they are less of a hassle i reckon. Furthermore, what happens to the age-old wisdom of 'buy and hold (forever)'? haha
Market liquidity and the fundamentals of a company - Good fundamentals might be a case for one to overlook low liquidity when both are present.
assume you pick correctly, when those companies become great in the future, liquidity would naturally increase in the market?
i was reading about a tiger fund manager who's a multibillionaire in the US, claims to invest mainly in small cap stocks.
in this context, how small cap is small cap really??
(28-10-2012, 11:40 AM)ikur1 Wrote: [ -> ]assume you pick correctly, when those companies become great in the future, liquidity would naturally increase in the market?
i was reading about a tiger fund manager who's a multibillionaire in the US, claims to invest mainly in small cap stocks.
in this context, how small cap is small cap really??
The definition may varies vary among brokerages and funds, but let's take the S&P Small-Cap 600 Index in US as reference, a small-cap company is generally defined as a stock with a market capitalization between $300 million and $2 billion