IG Group Trading Update & Capital Markets Day

[idpickering]

Trading Update

IG has continued to perform well in the final quarter of FY18. Net trading revenue for the full year is expected to be around £565m (FY17: £491m).

The Group's operating expenses for FY18, excluding variable remuneration, are expected to be around £254m (FY17: £253m), in line with previous guidance. The Group's charge for variable remuneration is expected to be around £36m (FY17: £24m).

https://www.investegate.co.uk/ig-group- ... 00069399O/

[idpickering]

I have often toyed with bringing this outfit into my HYP, but haven't pulled the trigger yet. Perhaps in the future though, but at 32 holdings I think I've got the diversification covered already perhaps?

Ian.

[kempiejon]

Ian,
At 32 you don#'t need more. I too am fully diversified and have no need of another pick. I've been interested enough in IGG before to look again but it's never made the grade, there were probably enough FTSE100s with a higher yield.

[Arborbridge]

One of my better holdings with a good rising divi and XIRR over 17% since 2011. It's been a good"gambling" share, better than my official gambling effort of Ladbrokes (sold years back).
But Ian, it may be too late for the moment as the yield has dropped to "more ordinary".


Arb.

[monabri]

I agree with Arb's view - the current yield of 3.7% is not sufficiently attractive to me. The time to buy was mid 2017 when the yield approached 6%. The view from the link below would suggest that the share price increase over the last year might retrace ( that's my interpretation* ).

https://simplywall.st/stocks/gb/diversi ... ngs-shares

So, if it is of interest, I'd put it on a "watchlist".


(*) Based on P/E , reducing Divi cover, anticipated growth (small) over the next 3 years, current share price versus cash flow suggesting the SP is overvalued.

[idpickering]

Thanks for your input guys, and valid points. I've decided against bothering with this share, for the reasons pointed out by my brethren here, and my own feeling that 32 holdings is plenty enough already. We're not stamp collecting here.

Ian.

[absolutezero]

Thanks for your input guys, and valid points. I've decided against bothering with this share, for the reasons pointed out by my brethren here, and my own feeling that 32 holdings is plenty enough already. We're not stamp collecting here.

Ian.

Surely the spread across industries matters as much as having your 32 companies.
32 mining companies isn't a diverse portfolio.
I'm a bit twitchy on my diversification.

Food Producers 12.53 %
Financial Services 11.87 %
Telecommunications 8.49 %
Banks 8.48 %
Household Goods & Home Construction 7.91 %
Oil & Gas Producers 7.26 %
Mining 7.04 %
Travel & Leisure 6.78 %
Insurance 6.73 %
REIT 6.28 %
Pharmaceuticals 6.27 %
Media 5.4 %
Software & Computer Services 2.11 %
Beverages 1.7 %
Investment Trust 1.13 %


Anglo American
AstraZeneca
Aviva
BP
British Land Company
Compass Group
Diageo
Greene King
HSBC Holdings
IG Group Holdings
Land Securities Group
Legal and General Group
Lloyds Banking Group
Manx Telecom
Persimmon
Primary Health Properties
Rio Tinto
RIT Capital Partners
Royal Dutch Shell 'B'
RSA Insurance Group
Sage Group
Sky
Standard Life Aberdeen plc
Tate and Lyle
TP ICAP
Unilever
Vodafone Group


I hold 27 companies across 15 sectors. I do wonder...

[idpickering]

Thanks for your input guys, and valid points. I've decided against bothering with this share, for the reasons pointed out by my brethren here, and my own feeling that 32 holdings is plenty enough already. We're not stamp collecting here.

Ian.

Surely the spread across industries matters as much as having your 32 companies.
32 mining companies isn't a diverse portfolio.
I'm a bit twitchy on my diversification.

Food Producers 12.53 %
Financial Services 11.87 %
Telecommunications 8.49 %
Banks 8.48 %
Household Goods & Home Construction 7.91 %
Oil & Gas Producers 7.26 %
Mining 7.04 %
Travel & Leisure 6.78 %
Insurance 6.73 %
REIT 6.28 %
Pharmaceuticals 6.27 %
Media 5.4 %
Software & Computer Services 2.11 %
Beverages 1.7 %
Investment Trust 1.13 %


Anglo American
AstraZeneca
Aviva
BP
British Land Company
Compass Group
Diageo
Greene King
HSBC Holdings
IG Group Holdings
Land Securities Group
Legal and General Group
Lloyds Banking Group
Manx Telecom
Persimmon
Primary Health Properties
Rio Tinto
RIT Capital Partners
Royal Dutch Shell 'B'
RSA Insurance Group
Sage Group
Sky
Standard Life Aberdeen plc
Tate and Lyle
TP ICAP
Unilever
Vodafone Group


I hold 27 companies across 15 sectors. I do wonder...

Certainly sectorial diversification is important too of course. My own HYP was discussed in this thread; viewtopic.php?f=15&t=11798 , and I must admit that I do try to stick to a maximum of 10% in a sector, and currently 4% per holding. You do seem well diversified, but if you wish, I do hold these that you don't; Admiral Group, BAE Systems, BHP Billiton, British American Tobacco, Direct LIne Group, Imperial Brands, ITV, Marston's, National Grid, Reckitt Benctiser, Sainsbury's and WPP.

Cheers,

Ian.

[absolutezero]

Certainly sectorial diversification is important too of course. My own HYP was discussed in this thread; viewtopic.php?f=15&t=11798 , and I must admit that I do try to stick to a maximum of 10% in a sector, and currently 4% per holding. You do seem well diversified, but if you wish, I do hold these that you don't; Admiral Group, BAE Systems, BHP Billiton, British American Tobacco, Direct LIne Group, Imperial Brands, ITV, Marston's, National Grid, Reckitt Benctiser, Sainsbury's and WPP.

Cheers,

Ian.

I do enjoy knowing what other people hold.
I've held quite a few of those over time - horses for courses I guess.

Admiral and Direct Line - I already have enough insurers!
BAE - Don't like their line of business.
BHP - recently dumped and replaced with RIO. There may be trouble ahead....
BATS and IMB - long term decline - much discussed elsewhere!
ITV - will probably buy this when (if?) Sky gets taken over.
Marstons - nothing wrong with it but prefer GNK
Reckitt - low yield at this time
Sainsbury - recently dumped due to falling share price (then Walmart happened but could easily fail)
NG - Avoiding all utilities. Ohhh Jeremy Corbyn
RB - think yield is a bit low at the moment

[Gengulphus]

I'm a bit twitchy on my diversification.

Food Producers 12.53 %
Financial Services 11.87 %
Telecommunications 8.49 %
Banks 8.48 %
Household Goods & Home Construction 7.91 %
Oil & Gas Producers 7.26 %
Mining 7.04 %
Travel & Leisure 6.78 %
Insurance 6.73 %
REIT 6.28 %
Pharmaceuticals 6.27 %
Media 5.4 %
Software & Computer Services 2.11 %
Beverages 1.7 %
Investment Trust 1.13 %

I'd be a bit twitchy on it as well. In particular, I don't really like having more than 10% in a sector or more than 20% in a group of strongly-related sectors. So I would regard Food Producers and Financial Services as somewhat overweight sectors, and "financials" as a rather more seriously overweight group of sectors (Financial Services + Banks + Insurance = 27.74%). Some might also count REITs and Investment Trusts as "financials", which would make the "financials" group positively obese, but I don't. As far as I am concerned, REITs are mainly based on property as an asset class rather than cash, and Investment Trusts aren't a sector: individual investment trusts are packaged-up portfolios that have their only sector distribution, which might be quite concentrated or very diversified depending on how specialised or general the investment trust is.

Incidentally, the difficulty of tracking that properly is a big reason why I would regard any significant holdings of investment trusts as a separate portfolio rather than part of a HYP. There's a basic difference of approach between a HYP and an IT portfolio: the HYP has you managing which companies and sectors it's holding, the IT portfolio has the IT managers doing that and you only exerting much vaguer, once-removed control over it by your choice of ITs - you're basically picking IT managers rather than companies. So diversification management is a job that one probably wants to do at a much more detailed level for HYPs than for IT portfolios - and it's quite a lot of work to track the diversification of the combined portfolio at a level that is both detailed enough for managing the HYP and copes with the much more soft-focus diversification picture one gets of the IT portfolio. Much less work IMHO to treat them as separate portfolios that you manage in different ways from each other.

But that really is "incidentally" in this context, because your Investment Trusts weighting of 1.13% hardly counts as significant holdings!

Anyway, I'm not saying that your approaching-30% holding in financials is an utter disaster in the making, but if something were to hit financials hard, it could be pretty painful - I speak from experience here, having made the mistake of letting my financials weighting creep up to over 30% in the run-up to the 2008-2010 financial crisis! And something hitting financials hard is by no means inconceivable: a bad Brexit outcome definitely has the potential to do that...

NG - Avoiding all utilities. Ohhh Jeremy Corbyn

Reason understood! But I think that totally avoiding all electricity, gas and water companies is an overreaction to that risk - IMHO it's a reason to keep their weighting fairly low rather than to make it zero. Basically, taking risks is unavoidable where equity investment is concerned: the reason for diversifying is the realistic aim of making the individual risks acceptably small, not the unrealistic one of eliminating them entirely.

To sum up this post, I'd be less twitchy about your portfolio's diversification if it had a few percent in each of energy utilities (i.e. gas and electricity combined - I wouldn't try to separate them as different sectors because most such companies have significant operations in both) and water utilities, and only around 20% in financials. Not totally untwitchy about it, but considerably less twitchy...

Gengulphus

[absolutezero]

I'm a bit twitchy on my diversification.

Food Producers 12.53 %
Financial Services 11.87 %
Telecommunications 8.49 %
Banks 8.48 %
Household Goods & Home Construction 7.91 %
Oil & Gas Producers 7.26 %
Mining 7.04 %
Travel & Leisure 6.78 %
Insurance 6.73 %
REIT 6.28 %
Pharmaceuticals 6.27 %
Media 5.4 %
Software & Computer Services 2.11 %
Beverages 1.7 %
Investment Trust 1.13 %

I'd be a bit twitchy on it as well. In particular, I don't really like having more than 10% in a sector or more than 20% in a group of strongly-related sectors. So I would regard Food Producers and Financial Services as somewhat overweight sectors, and "financials" as a rather more seriously overweight group of sectors (Financial Services + Banks + Insurance = 27.74%). Some might also count REITs and Investment Trusts as "financials", which would make the "financials" group positively obese, but I don't. As far as I am concerned, REITs are mainly based on property as an asset class rather than cash, and Investment Trusts aren't a sector: individual investment trusts are packaged-up portfolios that have their only sector distribution, which might be quite concentrated or very diversified depending on how specialised or general the investment trust is.

Incidentally, the difficulty of tracking that properly is a big reason why I would regard any significant holdings of investment trusts as a separate portfolio rather than part of a HYP. There's a basic difference of approach between a HYP and an IT portfolio: the HYP has you managing which companies and sectors it's holding, the IT portfolio has the IT managers doing that and you only exerting much vaguer, once-removed control over it by your choice of ITs - you're basically picking IT managers rather than companies. So diversification management is a job that one probably wants to do at a much more detailed level for HYPs than for IT portfolios - and it's quite a lot of work to track the diversification of the combined portfolio at a level that is both detailed enough for managing the HYP and copes with the much more soft-focus diversification picture one gets of the IT portfolio. Much less work IMHO to treat them as separate portfolios that you manage in different ways from each other.

But that really is "incidentally" in this context, because your Investment Trusts weighting of 1.13% hardly counts as significant holdings!

Anyway, I'm not saying that your approaching-30% holding in financials is an utter disaster in the making, but if something were to hit financials hard, it could be pretty painful - I speak from experience here, having made the mistake of letting my financials weighting creep up to over 30% in the run-up to the 2008-2010 financial crisis! And something hitting financials hard is by no means inconceivable: a bad Brexit outcome definitely has the potential to do that...

NG - Avoiding all utilities. Ohhh Jeremy Corbyn

Reason understood! But I think that totally avoiding all electricity, gas and water companies is an overreaction to that risk - IMHO it's a reason to keep their weighting fairly low rather than to make it zero. Basically, taking risks is unavoidable where equity investment is concerned: the reason for diversifying is the realistic aim of making the individual risks acceptably small, not the unrealistic one of eliminating them entirely.

To sum up this post, I'd be less twitchy about your portfolio's diversification if it had a few percent in each of energy utilities (i.e. gas and electricity combined - I wouldn't try to separate them as different sectors because most such companies have significant operations in both) and water utilities, and only around 20% in financials. Not totally untwitchy about it, but considerably less twitchy...

Gengulphus

The 'financials' bit is the twitchy bit.

Ignoring any finance related shares, HYPTUSS is saying top up PHP, 2nd place), VOD (5th place) and BP (6th place).

Other than utilities, which I am not contemplating at all, and fags and bombs are there any good sectors missing that have usefully yielding shares at the moment?

[bluedonkey]

When calculating % in each sector, should the denominator in that calculation exclude or include investment trusts/collectives? In my calculations I include it, but I haven't given it any thought before.

[idpickering]

Other than utilities, which I am not contemplating at all, and fags and bombs are there any good sectors missing that have usefully yielding shares at the moment?

I'm running a screen currently and see that Marks & Spencer, and BT Group are right up there offering decent yields at the moment, if that helps? I'm a big fan of BT Group today particularly, as their engineer just sorted our internet out two hours ago in our new gaff in Orkney.

Ian.

[absolutezero]

Other than utilities, which I am not contemplating at all, and fags and bombs are there any good sectors missing that have usefully yielding shares at the moment?

I'm running a screen currently and see that Marks & Spencer, and BT Group are right up there offering decent yields at the moment, if that helps? I'm a big fan of BT Group today particularly, as their engineer just sorted our internet out two hours ago in our new gaff in Orkney.

Ian.

M&S is another no thanks. Lots of struggling stores, frumpy frocks. Can't see things getting any better.
Recently dumped BT. Falling. Falling. Falling.

Semi tempted by Stobart and/or more Shell.

[idpickering]

Other than utilities, which I am not contemplating at all, and fags and bombs are there any good sectors missing that have usefully yielding shares at the moment?

I'm running a screen currently and see that Marks & Spencer, and BT Group are right up there offering decent yields at the moment, if that helps? I'm a big fan of BT Group today particularly, as their engineer just sorted our internet out two hours ago in our new gaff in Orkney.

Ian.

M&S is another no thanks. Lots of struggling stores, frumpy frocks. Can't see things getting any better.
Recently dumped BT. Falling. Falling. Falling.

Semi tempted by Stobart and/or more Shell.

Fair enough absolutezero. I don't hold MKS for much the reasons you've mentioned. I've never looked at Stobart, so have no opinion there.

Ian.

[absolutezero]

When calculating % in each sector, should the denominator in that calculation exclude or include investment trusts/collectives? In my calculations I include it, but I haven't given it any thought before.

Depends if you see your portfolio as one large one or lots of small ones.

[bluedonkey]

When calculating % in each sector, should the denominator in that calculation exclude or include investment trusts/collectives? In my calculations I include it, but I haven't given it any thought before.

Depends if you see your portfolio as one large one or lots of small ones.

Just thinking it through. Say total long-term investment portfolio £100k total, of which £90k in ITs and £10k in individual shares. Would I tolerate all of that £10k in say, one sector, that is 10/100; or £10k split between 10 sectors due to viewing it as separate, so 1/10.
Perhaps it's the corollary to Gengulphus pointing out that it doesn't make sense to view an IT as a single share when considering the diversification of a portoflio.