PinkDalek wrote: ian56 wrote:
staffordian wrote: On the other hand, eleven out of the fifteen shares are either slightly or significantly under water capital wise and the contribution to income very unequal.
My bold, I could be wrong but I understood equal weighting at the start (ie £5000), to me it seems as if only 5 are therefore under water.
I don’t hold the history of HYP1, whereas I’m sure some do. However, there was a substantial capital return in, from memory, 2006 involving Ladbroke/Hilton. I’d hazard a guess that your 5 may be only 4 but nor do I know what happened with the 2009 rights issue.
The earlier capital returns were generally reinvested in the share that produced them, for no net loss of capital from the holding, and I'm pretty certain that 2006 is early enough for that to be true. And certainly Ladbrokes hasn't done very well, so I suspect it is among the capital losers.
However, one of the original 15 was Bass, which became Six Continents and then demerged into Intercontinental Hotels and Mitchells & Butlers. So those two should be counted together, and the combination is certainly a capital winner. Especially as they've done quite a few capital returns between them - Intercontinental Hotels in particular has been doing about one per year in recent years. The earlier capital returns were reinvested in the share that produced them, as commented on above, and I think that includes all of Mitchells & Butlers' capital returns. But certainly Intercontinental Hotels' recent capital returns have been reinvested in other companies, with the result that the holding values understate the Bass -> Intercontinental Hotels + Mitchells & Butlers capital performance and overstate that of the companies reinvested in (Lloyds this year, but there have been others, Shell among them IIRC).
But you may notice that means that the 15 current holdings only correspond to 14 original holdings - what happened to the 15th original holding? The answer is that it was Alliance & Leicester, which got taken over during HYP1's year 8 - a "dark year" for the portfolio because pyad left TMF 2-3 months into it and only returned somewhat over a year later, some months into its year 9. Two other companies also got taken over during that year, and only two replacement companies were bought for the three that had gone - Pearson and Persimmon. Of the three takeovers, Alliance & Leicester was the smallest and if memory serves me correctly, pyad has mentioned that he reckoned it was too small for a replacement holding, so he topped up one or more existing holdings instead: I've a feeling Shell was among them, or possibly even the only one. I don't think he ever produced a detailed account on TMF of what happened to HYP1 in year 8 (certainly there was no "HYP1 is 8" article or HYP board post around November 13th, 2008), so exact details are difficult to be certain about.
So I rather suspect that Shell may be the 'heir' of two original £5k chunks of capital, or even a bit more because of reinvested returns of capital by other holdings, and so that it is actually a capital loser - though if so, the blame for much of that capital loss is due to Alliance & Leicester, not Shell. And similarly, the credit for much of BATS's capital gain is actually due to Gallaher, which it replaced on a takeover, and similarly the credit for much of BT's capital gain is actually due to Associated British Ports, and so on.
The moral of all of which is that keeping track of the original 15 x £5k holdings' separate contributions to each current holding's capital value is not
easy, because of the 'mixing' effect of takeovers and other corporate actions. The "reinvest in holding that produced it, or replace if that's impossible due to takeover" policy might hold that off for quite a while, but if persisted in will eventually produce silly results due to reinvestments that are too small or that buy shares blatantly not in accordance with HYP share selection principles. As a result, "what happened to the capital in each original holding?" becomes a question whose answer is hard to determine and
which doesn't actually tell you all that much about the current holdings...