No. of Recommendations: 39
The charts are all up, using Yahoo data: http://invest.kleinnet.com/bmw1.

CAREFUL!! Yahoo data is both split-adjusted (good) and dividend-adjusted (!?!?). This makes charts from MSN and Yahoo not comparable.

Also symbols have changed -- not for many stocks, but for all indexes. Indexes are now listed at the end of the lists of stocks on each index page. Most special request symbols that were part of the weekly run have not yet been moved over, but at least the majority of the interesting charts are there.

Let me know if there are any glaring problems.

-Mike
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No. of Recommendations: 1
Mike:

Great! Looks like you've been busy too.

According to Investopedia:

"When distributions are made, the adjusted closing price calculations are quite simple. For cash dividends, the value of the dividend is deducted from the last closing sale price of the stock. For example, let's assume that the closing price for one share of XYZ Corp. is $20 on Thursday. After close on Thursday, XYZ Corp. announces a dividend distribution of $1.50 per share. The adjusted closing price for the stock would then be $18.50 ($20-$1.50)."

I'm not sure of a good reason for doing this. It kind of makes for an artificial closing price.

Bosco.
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No. of Recommendations: 3
The bmwmethod.com screens are updated and, yes, there is quite a bit of difference in the data. I'll have to check on the ticker symbols for the indexes and stuff.

Thanks Mike!

Denny Schlesinger
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No. of Recommendations: 4
Actually, this is a great development. The dividend-adjusted prices reflect real returns to shareholders, whether the company pays no dividend, a small dividend, a large dividend, or sporadic dividends.

Remember when MSFT paid out $3 per share? That led to a huge drop in the share price (about... $3!) that had nothing to do with the value of the ongoing business. Still, if anyone had been waiting for that drop in price, they might have bought the stock based on nothing at all.

Dividend-adjusted prices take all this into account. This is a good thing.

SubGuy
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No. of Recommendations: 4
"CAREFUL!! Yahoo data is both split-adjusted (good) and dividend-adjusted (!?!?). This makes charts from MSN and Yahoo not comparable." - mklein9

I think this would be a wonderful discussion for the next BMW Method Conference. Maybe Mike can run some typical charts from last week's data and some from the Yahoo dividend adjusted data. The comparison would be very interesting to me. If we analyze some old blue chips w/decent dividend with some high growth w/o dividend stocks, we might get a better look at how the dividends affect the price performance over time.

Am I the only one who thinks this is worth doing? How about it Gary?

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No. of Recommendations: 2
"Dividend-adjusted prices take all this into account. This is a good thing." - SubGuy

I originally wanted the data without dividend adjustment because the DOW 30 and S&P 500 indexes did not include dividends. I was attempting to use the DOW and S&P history to show the way we can use the long-term historical index data guide us in selecting individual stocks.

The other reason was that I was using the BigCharts site for my hand-drawn charts. They use the unadjusted data.

I like the Yahoo data too. It is important for us to keep track of the data source and to understand how the dividend adjustment affects the picture. Right now, I have no idea how much the picture may change using Yahoo. I like the idea of correcting for spin-offs and dividends because that gives an apples to apples view of one stock versus another.

There is just no "best way" to do this. But, the BMW Method should not care because the math stays the same no matter what data we use.
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No. of Recommendations: 2
I'm glad the charts are now dividend adjusted. In my opinion, this goes a long way towards leveling the playing field. Ultimately, the BMWm is about deciding between stock x and stock y. The more variables we can remove from the comparison the better. In this case, the adjustment will allow for a much more actionable EV ranking.

However, the apparent lack of consensus makes me question my understanding on this point. So a conference discussion would definitely be appreciated. Hopefully the attendees can pass along their wisdom here on the board.

John
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No. of Recommendations: 4
"I'm glad the charts are now dividend adjusted. In my opinion, this goes a long way towards leveling the playing field.....However, the apparent lack of consensus makes me question my understanding on this point."

I haven't seen the lack of consensus you mention. I hope you did not take my comments as a lack of support for the Yahoo data.

My only comment had to do with the link between individual stocks and the market index. Since the market is not dividend adjusted and stocks are with the Yahoo data, it could be argued I am comparing apples and oranges with my original arguments.

Remember, the whole concept of the BMW Method was that we can look at the DOW as 30 individual stocks. If the DOW can grow at 8% to 10% annually, then we can beat the DOW by owning the under-valued stocks. Once we toss dividends into the equation, that comparison is no longer valid.

Now, I have maintained that the dividends are actually gravy and they add to the profitibility of the situation. I think a comparison of the data from MSN and Yahoo will bear this out. But, without the comparison, we will not know. I think it helps to see the picture on the charts so we will have confidence our assumptions.

The bottom line is we need to work with the data that we have avalable at the lowest possible price. Thanks to Mike's wonderful work, we have free data from Yahoo while MSN seems to have cut off our lines of communication for some reason.

I need to take a look at Yahoo's data. Hopefully, I can get accurate historical quotes back 30 years like I can with BigCharts. I will let you know what I find.
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No. of Recommendations: 2
Assume the low (or -2RMS) CAGR price $20 and the current price of XYZ, Inc. is $21 at the close.

We might not be tempted to buy. at a close of $21.

However, after the close a dividend of $1.50 per share is paid. The Y! closing price is adjusted to $19.50, and BANG! All of a sudden the chart is just under the low CAGR or -2RMS.

Is XYZ a BMW Method buy, assuming we've done all the DD and were just waiting for a price drop?

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No. of Recommendations: 4
"...after the close a dividend of $1.50 per share is paid. The Y! closing price is adjusted to $19.50, and BANG! All of a sudden the chart is just under the low CAGR or -2RMS.

Is XYZ a BMW Method buy, assuming we've done all the DD and were just waiting for a price drop?" - GrahamInv

First, the example makes no sense to me. If the dividend is $1.50/share, and the stock is selling at $21/share, pre-dividend, The stock is paying a 28.6% dividend. That is not a realistic scenario the way I see it.

If the dividend is really $1.50/share, the stock should be selling closer to $200/share. The sudden price drop of $1.50/share should not make enough difference to talk about. I cannot see the price drop from $200/share to $198.50/share to change our opinion about the CAGR.

Looking at this the other way, a $20 stock might logically pay a 5% divided of $1.00/share/year or $0.25/share quarterly. A sudden drop from $20 to $19.75 is normal an any day and would not trigger a buying panic due to the low CAGR.

I hope this makes sense.
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No. of Recommendations: 0
BMW-

If the stock is a REIT and the distribution is an irregular l/t cap gain (like the ones CUZ pays regularly) you could get this sort of price action.

REITs don't really lend themselves as well to this sort of analysis...I know.

et
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No. of Recommendations: 1
Yeah I realize the example is suspect... :-) You're absolutely right though, we shouldn't really care since in most cases the adjustments are likely to be minimal

I looked at the Yahoo! Help section and it appears that they calculate the dividend adjustment as a percentage of price. See:

http://help.yahoo.com/l/us/yahoo/finance/quotes/quote-12.html

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No. of Recommendations: 2
You're absolutely right though, we shouldn't really care since in most cases the adjustments are likely to be minimal

It becomes more of an issue the further back you go -- compounding. When you compound 30 years of dividends and throw in a few splits, the "adjusted closing price" on Yahoo can become pennies. And therein lies the problem. If they show an adjusted closing price of $0.03 (that's all the precision they use), that means the REAL adjusted price could be anywhere from $0.025 to $0.0349 -- nearly a 40% difference between the two!

I recall a discussion a while back about generating the adjusted closing prices, because the full history of data/dividends/splits can be retrieved from Yahoo. I looked it up in my archives and found a thread on the XLTrade Yahoo Group:

http://tech.groups.yahoo.com/group/xltraders/messages/5682?threaded=1&m=e&var=1&tidx=1
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No. of Recommendations: 0
The example given is similar to the MSFT special dividend a while back. There is a danger in an event like this. If you place a limit order (like I do) to buy your favorite company "if only it were cheap enough" (i.e. at -2RMS) and a large dividend causes the price to drop a lot on the ex-dividend date, your limit order could be executed.

However, that's not the fault of the BMW method per se. You see, once the historical data are adjusted for that dividend (at closing on the ex-dividend date), the whole price history chart will shift downward by the percentage of the dividend. That means the -2RMS line will also shift downward, and it's time to change your limit order to the new lower value anyway.

To guard against a false execution like this, it would make sense to adjust your limit price downward ahead of the ex-dividend date (estimating the new -2RMS price), or cancel it outright, then write a fresh limit order after the historical data have been adjusted for the dividend.

For a small, regularly occurring dividend, it shouldn't be necessary to take any extraordinary action.

SubGuy
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Am I the only one who thinks this is worth doing? How about it Gary?

BMW


Jim,

I will put anything on the agenda that is of interest to the attendees. I have captured this a potential agenda item. I am thinking that it may play out before the conference as it 7 months out.

Cheers,
Gary
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"I am thinking that it may play out before the conference as it 7 months out." - Gary

Even if MSN Money returns with the data and Mike changes back to that source, the problem will persist. Yahoo data will still be giving us a different view of a stock due to their dividend corrections. I think it would be good to understand just how much this affects various charts.

Then again, I am a nut when it comes to this BMWM stuff. This may be to esoteric for the rest of us. Let's hear what the others think.
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The example given is similar to the MSFT special dividend a while back. There is a danger in an event like this. If you place a limit order (like I do) to buy your favorite company "if only it were cheap enough" (i.e. at -2RMS) and a large dividend causes the price to drop a lot on the ex-dividend date, your limit order could be executed.

However, that's not the fault of the BMW method per se. You see, once the historical data are adjusted for that dividend (at closing on the ex-dividend date), the whole price history chart will shift downward by the percentage of the dividend. That means the -2RMS line will also shift downward, and it's time to change your limit order to the new lower value anyway.


I don't know about other online brokers, but E-trade adjusts limit orders on ex-dividend dates automatically. They will also send you an alert to let you know it has happened.

ESP
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