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truthisntstupid (83.48)

HELP MF!.....ITT Split/Spinoff of XLS, XYL

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November 03, 2011 – Comments (15) | RELATED TICKERS: ITT , XLS , XYL

So I get these two alerts today.

One says, ITT had a 2:1 split, and my start price has been adjusted accordingly.

The other says, ITT has paid out a dividend of $38.04, and the starting price for my pick has been adjusted to reflect the value of this dividend payout.

OK.  My original start price when I made ITT a pick on Dec 17, 2010, was $51.04.

Yesterday, my start price had been adjusted down to $50.67 by the action of the Feb 28, May 18, and Aug 24 quarterly dividend payments of $0.125 each.

I would just like to be able to understand the math behind arriving at my new start price of $54.72 and my stock gain of -63.23%.

The spinoff worked as follows.  If you had actually owned, say, 10 shares of ITT before the split and spinoff, then afterward you would end up with 10 shares of XLS, 10 shares of XYL, and 5 shares of the "new" post-2:1 split ITT.

No matter how I try to run the numbers, I can't understand

1) how the "dividend" of $38.04 was arrived at.  

2) why my start price has increased rather than decreased

Yahoo!Finance shows the effect of the reverse split to have halved the "adjusted" close.  I know that Motley Fool adjusts members' start prices for picks pretty much the same way (actually, exactly the same way) that Yahoo!finance adjusts its "adjusted" close prices.  Based on that, I figured that from the 2:1 split alone my start price should be around $25.34.  

Then there's the "dividend" of $38.04.  I assume it will be based on the value of the shares spun off treated as if it were reinvested in shares of ITT, but I'm just guessing.  

But I don't see how my pick should be down 63.23% any way under the sun.

So what I'd like to know is....are us CAPS members that had ITT as a pick before the split/spinoff going to get point-shafted the way this guy apparently did with the MO spinoff?

 http://caps.fool.com/Pitch/MO/2197445/this-site-is-ridiculous-i-got-.aspx

15 Comments – Post Your Own

#1) On November 03, 2011 at 12:25 AM, thecherryz (92.15) wrote:

My guesses:

#1 38.04 is the sum of xyl and xls. (which mathematically it would be just about right)

 #2 is probably because cost basis would be xyl+xls+your cost basis for itt.

 

Disclosure: 

I had options before the split and my portfolio gained about 40% from them, even though only options made up less than 25% of my port.  That's hugeeeeeeeee.  Also have a ton of common stock. 

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#2) On November 03, 2011 at 12:29 AM, truthisntstupid (83.48) wrote:

thecherryz

That's what I figured to but I can't make it come out right.

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#3) On November 03, 2011 at 12:36 AM, truthisntstupid (83.48) wrote:

Dividends are assumed to be reinvested in the stock at the ex-dividend day opening price.   That much I know.

But if I take $38.04 and try to figure it using the next day's opening price for ITT I don't even come close...and also, I'd like to know how the $38.04 was arrived at, because I've tried both the post-spinoff opening price and the previous day's closing price for XLS and XYL to try to come up with $38.04.  It doesn't work.

I just want to understand.  Best I can figure, my "stock gain" actually would be down slightly (if I'm even on the right track) but it would not be down 63.23%.

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#4) On November 03, 2011 at 12:39 AM, truthisntstupid (83.48) wrote:

Anyway, my cost basis for 1 share of XLS, 1 share of XYL, and 1/2 share of ITT would only be my original cost for ITT.

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#5) On November 03, 2011 at 12:52 AM, truthisntstupid (83.48) wrote:

OK. I looked again.  The separation took place after market closed on 10/31.  XLS closed 10/31 at $11.30 and XYL closed 10/31 at $26.74.  It DOES add up to $38.04.

I still want to figure the rest out.

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#6) On November 03, 2011 at 2:56 AM, HarryCarysGhost (99.74) wrote:

Hey Truth I was just monkeying around and found this-

HarryCarysGhost's rating is 99.52. Score: 6332.03 (100th percentile) Accuracy: 64.89% (97th percentile)

A player's rating indicates his percentile rank in CAPS. HarryCarysGhost is outperforming 99.52% of all CAPS players. A player's score is the total percentage return of all his picks subtracting out the S&P. A player's accuracy is how often that player has made correct predictions.

To calculate a player's rating, we take 2/3 of his score percentile and 1/3 of his accuracy percentile. For further information, read the Player Ratings section of the Help page.

Average Pick Score is a player's total score divided by the total number of picks (active and closed). It represents the player's average return after subtracting out the market's performance.

Average Pick Rating is the average stock rating of a player's total picks. Underperform picks are flip-flopped, so a underperform call on a one-star stock is treated like an outperform call on a five-star stock. This rating reflects how closely your picks are aligned with CAPS ratings.

Ratings last updated at 2:44 AM 11/3/2011.

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#7) On November 03, 2011 at 7:30 PM, truthisntstupid (83.48) wrote:

Thanks, Harry, but ITT just had a 3-way split and I'm trying to understand the calculations that went into figuring my new start price.  It really bugs me when I can't figure something out.

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#8) On November 03, 2011 at 10:02 PM, HarryCarysGhost (99.74) wrote:

Hey Truth reread this and realized my response was'nt pertinent to the point.

I thought there was something on the help page that answered your question, but I am quite likely mistaken.

If you want to hear something that I think is pretty funny I actually reported my comment for being off topic before you posted #7.

Anyhow my freind, I suppose you could use the contact the Fool feature to get your answer.

All the best.

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#9) On November 03, 2011 at 10:08 PM, HarryCarysGhost (99.74) wrote:

Let me try just leaving this part for referance-

To calculate a player's rating, we take 2/3 of his score percentile and 1/3 of his accuracy percentile. For further information, read the Player Ratings section of the Help page.

Average Pick Score is a player's total score divided by the total number of picks (active and closed). It represents the player's average return after subtracting out the market's performance.

Average Pick Rating is the average stock rating of a player's total picks. Underperform picks are flip-flopped, so a underperform call on a one-star stock is treated like an outperform call on a five-star stock. This rating reflects how closely your picks are aligned with CAPS ratings.

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#10) On November 03, 2011 at 10:28 PM, truthisntstupid (83.48) wrote:

I'm awful close to figuring it out...I come out within 50 cents of the same start price.  Only thing that bugs me is, I've always been able to follow their calculations to the penny!

It will bug me to death.  I'd like to figure it out myself...but hey, MF guys, this is driving me crazy and I wouldn't mind if you'd tell me how it was done.

Here's what I've got.  Although dividends are usually reinvested at the ex-dividend-day opening price, I'm figuring all this took place after close of business 10/31.  And ITT closed at $45.60.

So XLS closed at $11.30 and XYL closed at $26.74 on 10/31...add those together and that's where the $38.04 dividend came from. 

Since I'm figuring this was done at close of business 10/31, I'm dividing that $38.04 into the 10/31 closing price for ITT...which was $45.60.

So that $38.04 dividend bought me another 0.8342 shares. Add that to the 1.0146 shares that my pre-split CAPS start price of $50.67 was assuming, and that makes 1.8488 shares.  

Now for the split (reverse split, in which each 2 shares of the "old" ITT become 1 share of the "new" post-split ITT).   

1.8488/2 = 0.9244.

SO...my pre-split start price of $50.67 needs to be divided by 0.9244 to find my new start price of....$54.81!  

Yay!  I'm only off by nine cents from the $54.72 that MF is showing for my ITT start price.  Maybe it's only because of rounding errors, and I need to carry my computations out to more than 4 decimal places.

You MF guys can help any time you want.  Or I'll figure it out.  

I'm stubborn.

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#11) On November 03, 2011 at 10:41 PM, truthisntstupid (83.48) wrote:

Hmm.  I know I'm very much on the right track now.  The rest is easy - I just need to figure out whether I need to carry my computations out to more decimal places...or figure out if perhaps they rounded to less decimal places, making their computations come out a few cents different than mine.

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#12) On November 03, 2011 at 11:02 PM, truthisntstupid (83.48) wrote:

Yup.  There's nothing wrong with the start price for those of us who had ITT selected before the 3-way split.  Unfortunately, whatever XLS and XYL do from here on out does nothing for our CAPS score.  In real life, this 3-way split might go on (and probably will) to make us some good money.

BUT....ITT came out of this deal with $600M in cash and zero debt, with a low, low PE, and solid businesses with good free cash flow.

Read more here:

http://seekingalpha.com/article/303682-itt-spin-off-could-create-buying-opportunity

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#13) On November 03, 2011 at 11:37 PM, truthisntstupid (83.48) wrote:

For anyone interested in figuring out how I figured this out...

http://caps.fool.com/Blogs/dividends-and-capsand-how/591837

http://caps.fool.com/Blogs/dividend-yield-as-a-value/637016

These will help you.

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#14) On November 04, 2011 at 3:51 PM, truthisntstupid (83.48) wrote:

Ok, ok, ok...

So now you guys have decided that the $38.04 "dividend" should have been assumed to be reinvested in the stock at the post-split price of $22.80 instead of at the pre-split price of $45.60.  Which is what I thought in the first place. 

Are you guys just trying to make me look stupid or what? 

 

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#15) On November 04, 2011 at 6:35 PM, truthisntstupid (83.48) wrote:

Sh*t...no, that's not what you did...now I have to figure it out all over again!

Sure wish you guys would make up your mind.

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