Zachary - you need to compare a portfolio of $X in 2 or more stocks. In a small cap you get far more shares than you would in a mid cap (like SIR).
You are comparing a holding of (e.g.) $10,000 in a small cap (A) with a holding of $100,000 in a mid cap (B).
The reason you are doing this is possibly that you went from A to B (i.e. your holding in SIR went from A to B) and you think that they are equivalent holdings.
They are not equivalent on any measure. SIR at time point T1 when your holding was at A is nothing like SIR is now at T2. SIR is a totally different company at T2.
Somebody who buys into SIR at T2 (or at any point from now on) is buying into a totally different company than SIR was back at T1.
Your error is in thinking that it is unexceptional for a mid cap to drop 20%. It is not. It is unexceptional, however, for a small cap to drop 20%, for all the reasons I stated before.
In other words, the dollar value only has relevance to the absolute dollar value of the holding. Your example is correct but a person does not choose between spending $1.5m in a mid cap and $250,000 in a small cap. Your example has no utility.
There are 2 reasons:
1. You don't choose between small and mid caps (you could well have both but in making one decision you don't choose between completely different propositions).
2. You are deciding to spend $1.5m or $250,000. If you spend $250,000 then you never had $1.5m to spend. If you spend $1.5m then you wouldn't bother doing the research for a mere $250,000.
If you have 500,000 SIR, then when you sell, you will see what I mean. Not only is SIR a totally different entity now but you will be a totally different investor as well.
Meanwhile, the volatility will continue but will subside as SIR stabilises its sp. If, on the other hand, the sp rockets again, then the volatility will start all over again. That's why so many people get to buy at 50c but so few (of them) get to sell at $3 (let alone much higher).
SIR Price at posting:
$2.41 Sentiment: Hold Disclosure: Held
