The "New" Value Stocks

wildcat

wildcat

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Will we see a new breed of value stocks that come from less traditional areas - break up of companies and spin offs? Seems like what people call traditional value stocks (financials, etc.) are fairly priced and what people call growth stocks are bargains. I don't subsribe to either theory but I do believe the "new" value trend will continue and there may be some above avg appreciation in some stocks as a result. Anyone agree?
 
Did this come up because of Genworth? Just curious...


And no, I don't think I agree.... but I haven't given it much thought..........
 
Ahh not exaclty although Gen is technically a spin off. I just think there will be pressure from big, unfriendly institutional investors to improve financial results. Mgt's response will be to split up companies with unrelated businesses or with similar underfunded businesses.
 
Another reason why I hate buying individual stocks. The 'thrill' of calculating your basis when a company you own has been acquired to create 'synergy' and 'cost savings', and then spun off again a few years later to 'unlock shareholder value'.

:p
 
Cute n' Fuzzy Bunny said:
The 'thrill' of calculating your basis when a company you own has been acquired to create 'synergy' and 'cost savings', and then spun off again a few years later to 'unlock shareholder value'.
Click to expand...

It always puzzles me when folks worry over calculating cost basis. Unless you liquidate a VERY large holding the IRS is not going to go after you for the tax on the small difference in capital gain between a precise calculation and an educated guess. If you keep any kind of records and you file with a "reasonable" cost basis the worst that could happen is you owe some tax and penalty on the difference. And that would only happen if you are audited for that specific issue. I own shares in 25 companies acquired with many purchases over many years with dividends reinvested and many splits, mergers, spinoffs and buyouts. I would not even attempt to precisely calculate the cost basis. When I sell I just "eyeball" the records I do have and come up with a cost basis for schedule D. The number I come up with is probably with a $ or two of the "real" number per share. But it is not worth the IRS's time to even bother with it.

Grumpy
 
INTJ, left handed engineer, retired - I carry my DRIP stocks out to three decimal places. My account shakes her head - rounds off the numbers - mutters MEN under her breath and sends in my taxes.

heh heh heh
 
Jeez. And here I have been recording my DRIPs to 4 or 5 decimal places...depending on the stock.
 
About 10 years ago we decided to buy some power company stock directly on our power bill. We did it in dribs and drabs of $50 here, $100 there, and reinvested the dividends. We quit buying a couple of years later. The dividends continued to be reinvested.

Last year the company spun off a portion of its business (KAR) and the new shares were deposited in our brokerage account. We sold KAR and now it is time to pay the tax.

It is only a little money, but what a nightmare to figure out. We never really kept track, deciding we would die with the power company stock or give it away. I did get a record from the power company of each share purchase and each reinvestment, but man what a lot of work for a dinky bit of money.
 
Martha said:
About 10 years ago we decided to buy some power company stock directly on our power bill.  We did it in dribs and drabs of $50 here, $100 there, and reinvested the dividends. We quit buying  a couple of years later.  The dividends continued to be reinvested.

Last year the company spun off a portion of its business (KAR) and the new shares were deposited in our brokerage account.  We sold KAR and now it is time to pay the tax.

It is only a little money, but what a nightmare to figure out.  We never really kept track, deciding we would die with the power company stock or give it away. I did get a record from the power company of each share purchase and each reinvestment, but man what a lot of work for a dinky bit of money.   
Click to expand...

Martha, I hink the problem here was the nightmare of dividend reinvestment, not the fact that it was a spin-off. This sort of thing is why I don't do div reinvestment much, and certainly not in taxable accounts.
 
You are right Brewer. No fun trying to figure out basis when your dividends buy .317693942032304 of a share. ;)


Maybe I can mail our records to UncleMick and he can figure out my basis.
 
I have read some stories about older folks going in for the volunteer tax help and selling drip stock bought 30 years ago and coming in with no records. :p

I like Grumpy's idea (just wave the magic wand). I have a binder with all of my year end statements and a spreadsheet, though. Not to hard. I guess I have mine to 3 decimal places (must be an engineer thing).
 
Grumpy's idea sure sounds appealing, but I'm going to guess it wouldnt fly too well during an audit.

I play a little fast and loose (up to a point) with the IRS and I wouldnt send in a return with a rough guess for a cost basis...
 
I probably should not say this, but I can tell you from a tax practiioner point of view, the IRS   >:  Dcurrently has no automated way of checking the detail information on Sch. D.  That is why nobody you know has ever gotten a letter questioning line items on Sch, D. I am not advocating fudging anything  : angel:whatsoever, I am just saying I would not stress out over excrutiating detail on sch, D stock transactions.  :angel:
 
oldcrowcall said:
That is why nobody you know has ever gotten a letter questioning line items on Sch, D.
Click to expand...
TH, ol' buddy, looks like a 3-2 count, bases loaded & score tied in the bottom of the ninth, and a big fat hangin' slo-pitch over the plate.  What a start for spring training. It's all yours...
 
Thanks for calling the pitch.

Yep. I got exactly such a letter a little over a year ago questioning my schedule D.

My brokerage in conjunction with quicken and turbotax filled some stuff in incorrectly. The IRS inquired. I corrected the missing data that I *should* have given a once-read before sending it off, but I was in the middle of moving, getting married, fixing my wifes house and having a baby...

No additional tax, penalties or anything...but not what I needed.

Ooooooh...that suckers gone...

Also, if you get audited, the agent is most certainly going to want to see the worksheets you filled out to calculate basis. He might not check the math for you, but you better show a form.

Many stocks that have gone through tribulations of mergers and spinoffs provide worksheets somewhere on the company web site for calculating basis. Its a pretty good idea to do it...even if its just an approximation. Have a piece of paper with some sort of at least half assed math on it that shows what you think it is and why you think that. I used to jot down notes next to each number to explain what orifice I pulled it from.

I'm *really* happy being out of the individual stock game.

But those of you still in it? Thanks. I think you're where my money is coming from ;)
 
But those of you still in it? Thanks. I think you're where my money is coming from
Click to expand...

your "index fund diversersification insurance fee" comes out of your pocket, not mine, dude.
 
Cute n' Fuzzy Bunny said:
But those of you still in it?  Thanks.  I think you're where my money is coming from ;)
Click to expand...

Not sure how you get to that conclusion, but I'm happy you think so.

Frankly, most of what I own is not included in the major (or minor) indexes.
 
Bunny Fuzzy Cute -

Quick question and I am seriously not trying to ruffle any feathers -You shun individual stocks, stock picking and presumably active funds - So why do you own actively managed funds?
 
Quit reverse polishing my name! ;)

I dont shun anything. I just try to know whats what.

I bought individual stocks when I thought there was money to be made there. My triple digit returns for 6 years running show that to be true. I attribute 94% of that return to a market you couldnt lose in, and 6% to sheer luck.

I owned (and still own) actively managed funds where I thought those made sense, and made money on them in a sideways market. I also wanted stability, low volatility and high income, and some actively managed funds (specifically wellesley and wellington) offered those characteristics.

As the market settled and seems fairly valued, and I got married to a working woman and procreated, I moved into indexes as my horizon got a lot longer, volatility stopped meaning much to me, and I didnt need as much current income.

History shows that stock pickers rarely beat the market over the long term. Actively managed funds dont either.

No feathers ruffled and I hope no original ruffling occurred, as I including the 'winkie' and everything. Have we become desensitized to the single winkie and now need two and maybe a laugh thrown in to indicate sarcasm? ;) ;) ;)

That having been said, I havent taken a loss on any holdings for about 5 years. I've made plenty. That money came from somewhere. :) :)
 
I skipped Moneygram (and like you AMP) thinking the valuation was steep but I do believe there is some inherent catalyst when the business becomes its own separate entity.  I think the odds stack in your favor.  Brew - FYI - Verifone was a spin off from Hewlett Packard but it was done privately. 
 
wildcat said:
I skipped Moneygram (and like you AMP) thinking the valuation was steep but I do believe there is some inherent catalyst when the business becomes its own separate entity.  I think the odds stack in your favor.  Brew - FYI - Verifone was a spin off from Hewlett Packard but it was done privately. 
Click to expand...

I don't disagree. But I will have to lighten up on something else in order to have the capital to invest in a spinoff. Right now I am watching PPD and awaiting my chance.
 
I checked my DRIPs spreadsheet, and I have the number of shares recorded out to 9 decimal places -- that is how the brokerage reports them -- though the total cost basis for each company is only calculated to the nearest penny. These are PFICs (Japanese REITs, so probably not included in CFB's mutual funds :)), and I figure it can't hurt to be anal to show good faith in the event of an audit, given the hostile treatment they get from the US tax code.

Bpp
 
BTW Bunny Fuzzy Cute -

If I were in your situation (ER'd with a nice bank account) I would probably care less about individual stocks as well. So in a sense I would agree with you given your situation ;)
 
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