Dipy:
Re: Cost basis of 7-8.
Just for kicks, I was putzing around with ways to calculate a 'cost basis'.
Method 1:
For example:
I buy 200 shares at $10.
The stock goes upto $25.
I sell 100 shares at $25.
(Ignoring taxes and commissions for simplicity)
My cost basis on my remaining shares is:
(- 100*25 + 200*10)/100 = -5.
Method 2:
Or are you doing this the tax man away
and pocketing the $15 in profits on the 100 shares
and keeping the cost basis of the remaining at $10.
Method 1 is better because it reflects the entire history of the
stock in the portfolio. Method 2 is bogus if one is talking about the return of the stock since inception since one is conveniently
neglecting the old pieces. So, for example, a common occurrence is when people sell off a stock at a loss and then buy it back at a cheaper level and then kid themselves into believing that they can neglect the losses in calculating their returns. But many do! That old ladies' Investment Club will be proud. Method 2 is much like companies taking huge one-time charges only to say that in the future the earnings increases will be 20% per year! Method 1 is like comparing retained earnings to equity capital - much better to see the company's value added since birth. As to LSI you can see that they hurteth - those one time charges in 1992 and 1998 are monster admissions of life has changed and we have to reinvent ourselves - our old equipment is now worthless...
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My guess (based on your language as in 'Because I sold some of my LSI at a nice profit, the average cost price of the remaining shares (after taxes, commissions... the whole works)') is it is the former. Also note that under the IRS way (the 2nd way), your cost basis is unaffected by your selling of previous shares. So I have to assume it is Method 1 - I can't think of a reasonable other method to calculate one's cost basis.
Note that if it is METHOD 1 you have made no
profit on the ENTIRE portfolio unless you have a -ve cost basis! If this is so then this means that you bought a lot of shares above your last sale price of 43+ - which I doubt. So there is confusion lurking here. If it is method 2 then it means you bought the VAST MAJORITY of your shares in 1993/1994 at $14 and under (before the split) and I should ignore the language of 'Because I sold ...' in your prior post???? If this is the case kudos. And about time!
Just muddled.
FWIW I calculate my returns using cash flow in and out of the entire portfolio and adjusting for everything - the good old IRR. As unforgiving an indicator as any. I don't pay too much attention to each stock as doing so is a real pain! Besides one often zigs while the other zags and in the final analysis it is change in net worth (read: portfolio returns and IRR) that make the difference. I have seen people mouthing off about their huge triple digit returns in xxx stock on these boards and sometime later they mention they have 30-35 stocks. This is worthless hype since if 3% (1/33) of your portfolio goes up big-time you are not nearly as well off if you had only 1 stock and it went up triple digits!
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-- ending song: Repeat 13--
'The base revenues for LSI were $1.85 billion in 1998. Except for a IPR&D
accounting writeoff (bogus), the Symbios assets that LSI bought were not
subsequently written off. What did take place was a $5.4 million Symbios Integration
Accrual. Per the 10-K, page 42, this accrual comprised '$4 million related to
involuntary separation and relocation benefits for approximately 300 Symbios positions
and $1.4 million in other exit costs primarily relating to the closing of Symbios sales
offices and the termination of certain contractual relationships.' Therefore it appears that
the $75 mil restructuring charge taken later was for the 'old LSI' and has very little
negative bearing on Symbios continuing operations. LSI valued Symbios at a fair value
of $804 million - $324 million for tangible assets, $214 million for current technology,
$37 million for assembled workforce and trademarks, $83 million for goodwill, and
$146 million for IPR&D (this part was written off). In this context, $5.4 million is puny
and irrelevant. Symbios' assets (read: ability to generate revenue) only strengthened
after integration with LSI. They did not weaken. Further, LSI has not indicated that they
discontinued anything significant in the Symbios product line. Because they used
purchase accounting (versus pooling) LSI can't use pro-forma Q1, Q2, Q3 or full-year
1998 numbers going forward. It is NOT because, as Jock mumbles grandiosely: "It
would be a terrible disservice to the company, shareholders, and the public in general.".
Give me a freakin' break.'
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