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GDHYP purchase 51

Practical discussions about equity High-Yield Portfolios (HYP) for income
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Gengulphus
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GDHYP purchase 51

#161640

Postby Gengulphus » August 23rd, 2018, 11:33 pm

This is my long-overdue post to kick GDHYP back into action, following its period of no activity since it selected its 44th purchase near the start of June 2017. Many thanks to heathmount for posting a reminder about this matter about a month ago - it's taken a while for me to find the time to do it, but it did stir me into activity!

Fifteen monthly instalments of regular savings have arrived during that period, as well as a similar amount of dividends arriving and five corporate events changing the portfolio, namely Carillion's collapse, a rights issue by Galliford Try, a dividend cut by Pearson and two mergers. I should have made a total of seven purchases during the period, near the starts of August, October and December 2017, and of February, April, June and August 2018. I caught up on my record-keeping about all the things that had already happened on Monday and Tuesday this week, and belatedly selected the shares for the first six of those purchases late on Tuesday, using GDHYP's 'top-up procedure'. This was just in time to enter those purchases (which are GDHYP's 45th to 50th purchases) as orders for the Halifax ShareBuilder scale-model version of GDHYP for Halifax ShareBuilder's 'investment day' on Wednesday (yesterday). I have described all of that in more detail in a new "GDHYP catch-up and purchases 45-50" thread and will add further details to it when time permits. Please post any questions about or discussion of those matters to that thread and not this one, to leave this thread uncluttered for its purpose.

I have also reviewed and revised GDHYP's rules/guidance about what shares are acceptable candidates for a purchase and posted them in a new "GDHYP purchase candidate rules/guidance" thread, again to keep this thread uncluttered for its purpose, and also to make them easy to refer to in future GDHYP selections. The main points of them as they apply to this selection are given below, but please refer to that thread if you want more details, and if you're still left with questions about them or wish to discuss them, please ask the question or discuss them there, not here.

So the purpose of this thread: What share (within GDHYP's rules) do you think is the best one for GDHYP to buy for the last of its outstanding purchases, which will be GDHYP's 51st purchase? Note that best means best (as you see it, of course): please don't nominate a different share just because someone else has nominated the one you think best first, or give a list of all the shares you think are good enough, etc. (These are things people really have done in the past, and are great wasters of everyone's time... I.e. I'm not inventing an imaginary problem here!)

To summarise the rules that apply to this selection (as said above, please go to the thread linked to there if you need more details):

* Shares must be in the FTSE 350.
* Shares must have a yield >= 3.58% (this has some leeway below the FTSE 100 yield to allow for different varieties of yield and share price fluctuations).
* Shares must pay their dividends under the UK tax regime (this is almost guaranteed by FTSE 350 membership, but not quite - e.g. this rules out RDSA).
* Investment trust/company shares and preference shares are not allowed, though REITs (and just possibly a few others) are allowed as exceptions, and asset managers do not count as investment companies.
* Top-up purchases of existing shares in GDHYP are only allowed if the company name in the first table below has a "+" sign at its start.
* Initial purchases of new shares for GDHYP are not allowed if they are in financial sectors or the Energy Utilities (gas and/or electricity), Booze or Tobacco sectors.

The current state of the portfolio is given in the table below, and the amount available for the purchase will be £2,080.00 (this is based on the amount of cash GDHYP had available near the start of this month, and all of this is about the full-scale version of GDHYP). The rest of the portfolio's current cash will be added to by September's regular savings and the dividends that arrive over the next month and a bit, and used for the portfolio's 52nd purchase, due near the start of October.


And the following table summarises the sector breakdown of the portfolio as it is used in the above:


Finally, my rough anticipated schedule for the rest of this purchase are:

Saturday evening: Nominations close and I post the pre-poll. If there are more candidates than a single TLF poll can handle, I may well prune out some of the (IMHO) less likely ones to succeed rather than accept the extra complexity of a multi-part poll.

Monday evening: The pre-poll closes and I post the final run-off poll between the top candidates in its results.

Wednesday evening: The final run-off poll closes and I enter the winner for the next day's Halifax ShareBuilder purchase.

Gengulphus

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Re: GDHYP purchase 51

#161647

Postby Gengulphus » August 24th, 2018, 12:13 am

One standard ingredient of my OPs for GDHYP full voting procedure threads that I neglected to include - fortunately, an easily-fixed omission:

BHP Billiton gets an automatic nomination, as it has the lowest ranking sum (*) of any of the existing holdings that are eligible for top-up (**). Note this only makes it eligible to go into the pre-poll - any progress from then on is subject to the voting just as for any other nominated share.

(*) Last column of the table of holdings in my OP.

(**) Indicated by whether the first column of the same table starts with a "+".

Gengulphus

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Re: GDHYP purchase 51

#161849

Postby funduffer » August 24th, 2018, 4:07 pm

I would support topping up BHP Billiton (BLT), as the recent results were pretty good and the dividend has recovered strongly. There is also the prospect of a capital return / special divi following the sale of their US oil and gas interests.

For a new share, you might consider WPP in the Media sector - it looks a better prospect than Pearson.

Well done for keeping GDHYP going on this board - I find it very instructive.

FD

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Re: GDHYP purchase 51

#161859

Postby idpickering » August 24th, 2018, 4:21 pm

I would be topping up Lloyds as they seem to be the least in monetary value, from the list above.

Ian.

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Re: GDHYP purchase 51

#161861

Postby Gengulphus » August 24th, 2018, 4:24 pm

funduffer wrote:I would support topping up BHP Billiton (BLT), as the recent results were pretty good and the dividend has recovered strongly. There is also the prospect of a capital return / special divi following the sale of their US oil and gas interests.

For a new share, you might consider WPP in the Media sector - it looks a better prospect than Pearson.

Which do you think is the best of those two, please?

Gengulphus

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Re: GDHYP purchase 51

#161867

Postby funduffer » August 24th, 2018, 4:31 pm

Gengulphus wrote:
funduffer wrote:I would support topping up BHP Billiton (BLT), as the recent results were pretty good and the dividend has recovered strongly. There is also the prospect of a capital return / special divi following the sale of their US oil and gas interests.

For a new share, you might consider WPP in the Media sector - it looks a better prospect than Pearson.

Which do you think is the best of those two, please?

Gengulphus


If I had to pick one, it would be BLT.

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Re: GDHYP purchase 51

#161871

Postby idpickering » August 24th, 2018, 4:42 pm

Gengulphus wrote:
funduffer wrote:I would support topping up BHP Billiton (BLT), as the recent results were pretty good and the dividend has recovered strongly. There is also the prospect of a capital return / special divi following the sale of their US oil and gas interests.

For a new share, you might consider WPP in the Media sector - it looks a better prospect than Pearson.

Which do you think is the best of those two, please?

Gengulphus


Of the two Gengulphus, I'd go for BHP Billiton. Thanks for your efforts regarding this thread also.

Ian.

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Re: GDHYP purchase 51

#161874

Postby PinkDalek » August 24th, 2018, 4:52 pm

I too would have said Lloyds but, if I've understood correctly, they are not allowed as a Top-up and are disqualified as the Financials (Group or Sector) is not "OK to buy overall?".

As a Doris I'd therefore go for +BP.

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Re: GDHYP purchase 51

#161878

Postby blobby » August 24th, 2018, 5:08 pm

Marston’s please G.

The financials are OK but the city hates them. I think this is the core of the HYP success story, just look at the numbers and ignore all the opinion.

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Re: GDHYP purchase 51

#161880

Postby Gengulphus » August 24th, 2018, 5:18 pm

idpickering wrote:I would be topping up Lloyds as they seem to be the least in monetary value, from the list above.

Sorry, not an allowed option this time - it doesn't adhere to:

"* Top-up purchases of existing shares in GDHYP are only allowed if the company name in the first table below has a "+" sign at its start."

There's nothing particularly mysterious or magical about that "+" sign, by the way - it's just an automatically-generated indication of the overall result of the yield, diversification, etc, requirements for the existing shares. In the case of Lloyds, the yield is easily OK and most of the diversification requirements are as well, but it's a financial and the second table indicates that as a group, financials are just under the 20% limit on purchase cost but just over on forecast income.

FWIW, it seems likely to me that this purchase will raise GDHYP's total forecast income by enough to bring financials within the forecast income limit, so that Lloyds will be eligible for top-up next time. And although it will break my usual reluctance to hold a full-voting-procedure selection less than 3 months after another, I'm probably going to use one for the next selection (due around the start of October) as well as this one. That's partly to shift to a more convenient schedule for me, but mainly because six top-up-procedure selections in a row did give me the impression that GDHYP was starting to suffer from a shortage of 'fresh blood' from full-voting-procedure selections. (That 'fresh blood' needn't be new shares, by the way - it can also be existing shares that have had a past dividend cut and are currently vetoed in top-up-procedure selections, like BHP Billiton and Lloyds. If and when they get the voters' approval again, they'll become completely unvetoed.)

Gengulphus

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Re: GDHYP purchase 51

#161883

Postby Gengulphus » August 24th, 2018, 5:34 pm

funduffer wrote:
Gengulphus wrote:
funduffer wrote:I would support topping up BHP Billiton (BLT), as the recent results were pretty good and the dividend has recovered strongly. There is also the prospect of a capital return / special divi following the sale of their US oil and gas interests.

For a new share, you might consider WPP in the Media sector - it looks a better prospect than Pearson.

Which do you think is the best of those two, please?

If I had to pick one, it would be BLT.

Thanks. And sorry about the question having maybe been a bit abrupt and unexplained - it's just that I don't really want to try to decide on whether a top-up of an existing share or a new share is what's wanted or try to read a preference into your wording, and if there are a lot of nominations, I will have to take everybody down to just one nomination (and conceivably even do a bit more pruning than that...).

Gengulphus

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Re: GDHYP purchase 51

#161892

Postby TUK020 » August 24th, 2018, 6:06 pm

Of the sharess in the portfolio, the ones I would be tempted to top up because I think they represent good value at the moment are NG, IMB and Mars. However, none these are on the allowed top up list.

The segments I would be tempted to top up with a new share are Media (either ITV or WPP) or Construction (PSN).

Are much dithering, I will plump for Persimmon

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Re: GDHYP purchase 51

#161904

Postby Gengulphus » August 24th, 2018, 6:40 pm

blobby wrote:Marston’s please G.

The financials are OK but the city hates them. I think this is the core of the HYP success story, just look at the numbers and ignore all the opinion.

Sorry - again it's an existing share that isn't marked with a "+" as OK to top up. This time, the thing that prevents it being OK is its "Booze" sector (*), which is overweight on purchase cost.

In case anyone is interested, that's the result of Greene King being chosen by the top-up procedure for purchase 45, the first of the six purchases I selected on Tuesday and actually did on Wednesday. And checking the spreadsheet, I find that's because although the Marston's holding had a higher yield and lower current value than the Greene King holding at the time, making it rank higher for top-up, its purchase cost was then over 5% of the total purchase cost of the portfolio, which disqualified it for a top-up. The Greene King purchase pushed the Booze sector over its purchase cost limit, and the Marston's purchase cost only dropped below 5% when purchase 46 pushed the portfolio purchase cost high enough.

(*) No, you won't find that in the ICB classification - both Marston's and Greene King are in its Travel & Leisure sector, and so is FirstGroup. So the sector would be even more overweight if I used the unmodified ICB classification... But Travel & Leisure is one of the ICB sectors I find simply too broad - I see little business similarity between an operator of rail/bus franchises and a pub operator/brewer - and so I split it: FirstGroup is "Travel", Greene King and Marston's might have been "Leisure", but "Booze" struck me as applying better to both their brewing and pub operations.

Edit: A further quick thought is that I think diversification is also at the core of the HYP success story, and basically it's saying "No, GDHYP has already jumped on to the 'City hates the pub operators' opportunity as much as it should".

Gengulphus

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Re: GDHYP purchase 51

#161910

Postby SDN123 » August 24th, 2018, 7:04 pm

Thanks for continuing this interesting and educational project!

I’ll nominate BAE.

A defensive share? (Ha ha)
Likely to benefit from a falling pound.
Likely to benefit (very unfortunately) from current world uncertainties.

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Re: GDHYP purchase 51

#161913

Postby Wizard » August 24th, 2018, 7:20 pm

I agree with suggestion of WPP.

Terry.

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Re: GDHYP purchase 51

#161915

Postby IanTHughes » August 24th, 2018, 7:22 pm

Thank you so much for all your hard work. This really is an instructive project

My recommendation:


BT Group (BT.A)


Ian

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Re: GDHYP purchase 51

#161922

Postby flint » August 24th, 2018, 7:49 pm

My nomination is Stobart Group. STOB

Flint

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Re: GDHYP purchase 51

#161931

Postby tjh290633 » August 24th, 2018, 8:31 pm

Looking at my own portfolio, the share which ranks highest for topping up, which you have not disqualified, is BHP Billiton, BLT. I think that there is no reason to expand the portfolio, although there could be a case for disposing of First Group and picking a replacement. Such a replacement ought not to be from the travel sector in my view.

So I propose BLT.

TJH

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Re: GDHYP purchase 51

#161936

Postby Crazbe7 » August 24th, 2018, 8:51 pm

My suggestion is Marks & Spencer Group (MKS.L)

Crazbe7

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Re: GDHYP purchase 51

#161937

Postby moorfield » August 24th, 2018, 8:51 pm

Another nomination for BLT, the highest yielding topupable holding at f/c 5.94%.

28 holdings is bloated enough, so I'd suggest any new holding added should aim to beat the highest topupable yield.


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