Saturday, August 11, 2007

Of Life and Investment - A Metaphor

Frustration set in when you realize your investment is not doing well. Much more so if the subject is your most fancied holding. What would you do in such a case?

Buying more or cutting loss? Well, i guess it depends greatly on the subject, no?

If the fundamentals remain unchanged, and you still have time and faith in it, why not holding on? This might turn out to be your tenbagger (*) in life.


(*) A term coined by Peter Lynch, a stock that gives you a return of ten folds.

3 comments:

Vivek said...

Hi

I am having a look at the following examples

Volume 3, pg 281 - Illustration 39-14 - Calulcating the Weighted average number of shares for a 50% share dividend on June 1

In the above illustration we have calculated the number of outstanding shares from June 1- Nov1 using the Fraction of the Year as 5/12, since the 180,000 share are present from June 1 till Nov 1.

Now look at the following illustration on the next page
Volume 3 , pg 282 - Illustration 39-16 Calulcating the Weighted average number of shares for a 3 for 1 stock split

In this we have a split on the 1st of July, so I would assume there is a fraction of 6/12 (July till end of year) for 450,000 shares (after the split) - but I dont find this?

Can someone explain me Illustration 39-16 , specificly why we dont have 450,000 shares for 6/12 and how they come up witg 150,000 from May 1 - Dec 31 with a fraction of 8/12

Vivek

The Nivek said...

Hi,

Illustration 39-16.

can be decomposed into 3 parts

a)Jan1-May1 180,000 x 3 x 4/12 = 180,000

b)May1-Jul1 150,000 x 3 x 2/12 = 75,000

c)Jul1-Dec31 450,000 x 6/12 = 225,000 (no restatement)

Total : 480,000 shares

You still get 480,000 weighted average of share outstanding. The material combined (b) and (c) in one step.

Vivek said...

Thanks a lot.
As if it isnt difficult enough, they have to use shortcuts in the book examples :-)

thanks again