Special A Gent
24 Jan 2018
Re: Slight Correction - SAG Hi PrefThank you for responding.Clearly you have given it great thought and offered a slightly different understanding.At the end of the day I think I can accept your view point.What ever we call it, it works for me. S.A.G.P.S. I hope I did not keep you up during the night, as I see you posted early in the morning . TAKE CARE
PrefInvestor1
24 Jan 2018
Re: Slight Correction - SAG Hi Again SAG,The second paragraph after the list should have read:-"Now all that said from another point of view I can see that what you were doing was selling part of your holding and then using JUST the cash resulting from that sale to average down and obtain more shares. And in doing so you turned your initial holding of 2000 (costing £2000) into 2292 (costing £2180.8) effectively lowering your average price per share."Apologies !ATBPref
PrefInvestor1
23 Jan 2018
Re: Methodology PLC - SAG Hi SAG,Well firstly I think that need to agree a definition for what the term "average price" means. To me it is the average price that you paid for your shares averaged over all the tranches that you purchased. So if you purchased 3 tranches then it will be:- N1 * P1 + N2 * P2 + N3 * P3 / (N1 + N2 + N3)Where Nx is the number of shares and Px the all up price paid (including stamp duty and all other transaction costs) for tranche x.Using this definition your gain/loss across all tranches is given by the formulaGain / Loss = Total no of shares * (Current Selling Price – Average Price)Things get more complicated when you start selling your holdings. In this case you need to explicitly decide how many shares from which tranch(es) are being sold. As in real life it is unlikely that different tranches will have been bought for the same price. The values of P1 to Pn then need to be adjusted accordingly.Now with those fundamentals in mind, my take on the effect of your transactions is as follows:-1. Buy 1000 @ £1.0 = average price £1 per share Agreed.2. Buy 1000 @ £1.0 = average price still £1 per shareAgreed.3. Sell 910 @ £1.10 leaves 1090 shares = average price of £1.0909Personally I dont agree with this. To my mind your average is still £1 and you have 1090 shares for which you paid £1 each + £1001 in cash. I don’t see that cash being in any way "attached" to the shares, any more than any of your other cash is. So why does it affect your average ?. Personally I don’t think it does.4. 910 shares sold @ £1.10 returns £1001 now re-invest £1,000Understood.5. Buy 1000 @ £1.0 = £1000 plus 1090 in holding makes 2090 shares @ average, price £1.04552Now you have 2090 shares and your average is still £1. After all you paid £1 for every single share that you have purchased. To my mind it doesn’t matter where the cash came from to fund the purchase.6. Sell 910 @ £1.10 leaves 1180 shares = average price of £1.18236Now you have 1180 shares and your average is still £1, because that’s how much you paid for them. And you have another £1001 in cash.7. Now re-invest £1001 @ £0.90 per share gives you 1112 share. So I assume that you mean that you bought 1112 shares @ £0.90 = £1000.8. Your average now is 1180 * £1 + 1112 * £0.90 / (1180 + 1112) =£0.951483p. You now have 2292 shares.8. Add 1112 shares to existing holding 1180 = 2292 total cost £1998.80 avg price £1.14669Not in my opinion !. How can your average go up when your average was £1 and you then bought more at a lower price ?. In other words you were averaging down. In my opinion that cant ever happen. In my view the average is £0.951483.9. Now take a 8 pence full year dividend payment 2292 shares x £0.08 = £183.36 giving a yield of 9.17%To my mind you have 2292 shares which cost you £2180 on which you received a dividend of 8p. So your yield was £183.86/£2180 = 8.41%. Of course the effective yield based on the current price of the shares would be £183.86/2292*current price.Now all that said from another point of view I can see that what you were doing was selling part of your holding and then using JUST the cash resulting from that sale to average down and obtain more shares. And in doing so you turned your initial holding of 2000 (costing £2000) into 2292 (costing £2000) effectively lowering your average price per share.So while I can’t agree with your average prices or yields I can see the benefit that you gained from averaging down. Just maybe we have a completely different definition of average price ?. Though I confess I am unsure what such a definition might be.ATBPref
Special A Gent
23 Jan 2018
Re: Sold OUT for Marktime - SAG PreI am interested in your methodology, but confess I dont understand it. I am looking at your list of trades in your post (hell of a lot of them btw but I guess the costs are factored into your averages).---------- ---------- ---------- ---------- ---------- ---------- ---------- --------Yes when ever I post I always include my costs whether a buy or sell.I use a spread sheet to track my trades without the cost figures included it would be impossible to make instant dicissions whether to buy or sell.S.A.G.
Special A Gent
23 Jan 2018
Methodology PLC Hi PrefPlease find data on Methodology PlcBuy 1000 @ £1.0 = average price £1 per shareBuy 1000 @ £1.0 = average price still £1 per shareSell 910 @ £1.10 leaves 1090 shares = average price of £1.0909910 shares sold @ £1.10 returns £1001 now re-invest £1,000Buy 1000 @ £1.0 = £1000 plus 1090 in holding makes 2090 shares @ average £1.04552Sell 910 @ £1.10 leaves 1180 shares = average price of £1.18236Now re-invest £1001 @ £0.90 per share gives you 1112 share.Add 1112 shares to existing holding 1180 = 2292 total cost £1998.80 avg price £1.14669So the average price can both rise or fall it just depends on the circumstances.Now take a 8 pence full year dividend payment 2292 shares x £0.08 = £183.36 giving a yield of 9.17% Pref would be obliged if you would respond to my figures can you confirm or deny as to whether they are correct S.A.G.
