Arborbridge wrote:Actually, I regard 2IN as an IT, so it's part of my IT basket. I know some people have it as an HYP share: it's an odd one!
3IN is listed with the AIC under the "specialist sector" as an IT with a yield of 4%, so that's why I put it in the IT basket.
Yes, its main activity is holding other investments, which for HYP purposes at least makes it pretty clear to me that it's an IT (*). But I don't personally regard that as an issue with holding it in a HYP, because its specialist nature plus the fact that its speciality is an area that cannot be invested in straightforwardly on the stockmarket gets rid of the main problems I see with regarding generalist ITs as HYP holdings. Those problems are sector classification/duplication ones (generalist ITs are IMHO basically in a mixture of all the sectors rather than being in any single sector, at least as regards what a HYP mainly cares about, namely the underlying business activities that generate the cash flow / earnings needed to pay dividends) and company duplication ones (a generalist IT holding is likely to not-very-noticeably increase one's effective weighting in some of one's HYP companies - not by a huge amount, but big enough that several such holdings can cumulatively make a very significant difference).
When an IT specialises in a specific business sector though, its sector classification becomes easy - and if it's a business sector that cannot be invested in straightforwardly on the stockmarket, the sector and company duplication problems vanish. So 3IN seems to me to be easily holdable in a HYP, classified as being in an "Infrastructure" sector.
Precisely the same considerations apply to REITs in my view. Their main activity is holding other investments, specifically property investments (usually commercial property), and I have no problem holding them in my HYP, classified as being in a "Property" sector. I often add the fact that they're REITs as a parenthetical comment - i.e. "Property (REITs)" - but that's basically just a case of attaching a bit of further information that I might want a reminder of (specifically about the tax status of its dividends, or at least most of them) rather than a real part of its sector description as far as I am concerned. In particular, non-REIT Property companies do exist - an example is Capital & Counties Properties (CAPC), which was in my HYP at one time (**) as a result of Liberty International (which I purchased in 2007) demerging in 2010. I certainly didn't regard that as placing it in a different sector to the REITs in my HYP!
(*) I say "for HYP purposes at least" because I've seen some posts stating or suggesting that the strict definition of an IT involves its exact legal structure in some way, so that if a company mainly holds other investments but hasn't been set up with the right legal structure, it isn't actually an IT. I don't know much about the truth of that (though I'd have no trouble believing it), but I do know that as a HYPer, if two companies are basically doing the same sort of thing, I want to treat them as being in the same sector regardless of their exact legal structure.
That doesn't mean their exact legal structure is totally irrelevant to me - for example, BHP Billiton's legal structure as a UK/Australian "dual listed company" does have implications about how I should calculate its market cap and about interpreting some of its announcements (especially the tax treatment of the Australian part's dividends), and Shell's 2005 'reunification' was basically it changing its legal structure from a UK/Dutch "dual listed company" to a more conventional single-parent-company-and-its-subsidiaries structure, very definitely affecting my shareholding. But neither of those is relevant to my classifying them as being in the Miners and Oil & Gas Producers sectors respectively.
(**) I tinkered it away in 2013, my reason being that for various historical reasons, including the Liberty International demerger, I'd accumulated six different property companies in my HYP. A bit excessive, considering that all its other sectors had 1-3 holdings each, and I eventually decided to rationalise it. So I took a good look at all six companies, as a result of which I sold off Capital & Counties, Hammerson and Intu and topped up British Land, Mucklow and SEGRO.
Which currently looks pretty well judged, on capital grounds at least - a comparative price chart of the six shares gives their capital performance order since the date I made those changes (18/10/2013) as (from best to worst) SEGRO, Mucklow, British Land, Hammerson, Capital & Counties, Intu. But it also shows quite a lot of leapfrogging between them, about 4.5 years is still not very long-term by HYP standards, and of course a share price chart does not include the important dividend returns. So I'm not regarding that "pretty well judged" as anything more than a very tentative verdict, quite likely to be overturned in the properly long term!
I should also add that I am
not putting Capital & Counties forward as a HYP candidate now - with a well sub-1% yield, that would be ridiculous! Its only relevance to this board is that it has been in my HYP in the past and it provides a useful example of a non-REIT Property company.
Gengulphus