Seeking advice on HYP construction

[fisher]

Consider BDEV (Barratts) perhaps - basic yield @ 4.6% plus specials have been paid last couple of years.

[Raptor]

Yes, it is too low to be HYP. Now in the round file

One caveat, IMO (this has been discussed to death here, before you joined): I think ULVR is an acceptable addition provided that the yield of your whole portfolio remains high. Agree you might want to hold off though until the vote is settled.

Moderator Message:
Unilever does not currently meet the guidance for HYP. A High Yield for the portfolio does not negate the fact that it does not fit as HYP buy currently.

Raptor.

[micrographia]

Thanks micrographia (Mr Hooke?),

Outed!


EEM

[Gengulphus]

My only comment is that you are a bit heavy on the financial side, with a bank, an insurer, a fund manager, another insurer and an odd financial outfit.

5 out of 11 is a bit too concentrated for me. Two would be enough at this stage. You have a lot of sectors uncovered.

Agreed that it's heavy on financials (though I'd have said "very" rather than "a bit"!). But I can only see the four I've coloured and emboldened:

Lloyds Grp. (HSBC)
Std Life Aber (Investec)
National Grid (Centrica)
Aviva (Legal&General)
WPP (MoneySupermarket)
Rio Tinto (BHP Billiton)
Vodafone Grp. (BT)
Royal Dutch Shell 'B' (BP)
Glaxosmithkline (AstraZeneca)
Imp.Brands (BAT)
Direct Line (Admiral)

Which is the fifth?

But even 4 out of 11 (about 36%) is very heavy in my view, so as I said, I basically agree with you. The one thing I would add is that if EssDeeAitch intends to grow the portfolio reasonably quickly (adding another share per quarter would be fast enough IMHO), then 4 out of 11 is bearable - a year's worth of that would take it to 4 out of 15 (27%), which is about the level at which I would say "a bit", and a bit over another year to 4 out of 20 (20%), which is about the top of the range in which I would think of financials as normally weighted.

But I'm not recommending that course of action - just saying it's not an unreasonable one. It would also be very reasonable to take the number of financials down to 2 or 3, and I think less risky, as there clearly are substantial, bigger-than-usual uncertainties about the next year that seem to me to be likely to affect financials more than averagely... That could turn out either unusually well or unusually badly, so weighting financials a bit highly doesn't look clearly wrong to me, but it does have a bit more of a 'gambling' element to it than normal.

On the specific share choices, I think I would choose HSBC over Lloyds, as its very international operations do expose it rather less to that 'gambling' element than Lloyds' more UK-based operations, and it also has a rather better record to having weathered the financial storm of 10 years ago. I definitely prefer Legal & General to Aviva on the basis of its much better record. On the others, I think I either agree with EssDeeAitch's choices or regard them as 'much of a muchness' choices.

Gengulphus

[moorfield]

EssDeeAitch

Raptor has bitten perfectly at my post, and therein lies my advice ie. understand first why you are constructing a HYP, and what your own objectives for the sum of its parts are. In that respect, I'm suggesting lower yielders needn't be overlooked for the sake of being dogmatic, although you have to eliminate a lot of higher yielding candidates first. (I've sometimes thought it incongruous that newcomers as yourself are discouraged from buying lower yielders, yet greybeards who have held for many years are often lauded for having "a good looking HYP" - if you both hold the same number of such shares today, your income will be no worse off than each other this time next year.)

None of us here execute HYP strictly - recently a knee-jerk wholesale disposal of utilities shares and an epically pythonic expenditure of time/effort discussing a company's internal share structure attest to that - and remember it's your own hard-earned you are putting at risk, not ours, so do what helps you sleep well, and good luck ...

Yes, it is too low to be HYP. Now in the round file

One caveat, IMO (this has been discussed to death here, before you joined): I think ULVR is an acceptable addition provided that the yield of your whole portfolio remains high. Agree you might want to hold off though until the vote is settled.

Unilever does not currently meet the guidance for HYP. A High Yield for the portfolio does not negate the fact that it does not fit as HYP buy currently.

Raptor.

Moderator Message:
Re: Raptor "biting perfectly". His comment has since been edited to make it clear that he was responding as a moderator. -- MDW1954

Moderator Message:
As a reminder to everyone, excerpt from the HYP posting guidlines: Discussion of potential shares, and of shares which have been selected in the past, is acceptable on the HYP Practical Board. -- MDW1954

[EssDeeAitch]

Again, thanks to all for your input, it is really very useful. As suggested, I have dropped some financial services and included house builders and beverages. I am not bothered about NG and UU being utilities as they are different utilities and if there is any Corbyn factor, we are all doomed anyway.

I still welcome any feedback especially if there are any howlers (but I have yet again, made comparison with competitor companies).
As a matter of interest, the reason for building a HYP is so that I can at least outstrip inflation and if I realise 4% income (as things stand) then I will be happy enough. This will run alongside other investments with other objectives.

HSBC Hldgs.Uk - Banks
Greene King - Beverages
Std Life Aber - Financial Services
National Grid - Gas Water and Multiutilities
Utd. Utilities - Gas Water and Multiutilities
Barratt Devel. - Household Goods and Home Construction
WPP - Media
ITV - Media
Rio Tinto - Mining
Vodafone Grp. - Mobile Telecommunications
Direct Line - Nonlife Insurance
Royal Dutch Shell 'B' - Oil and Gas Producers
Glaxosmithkline - Pharmaceuticals and Biotechnology
Br.Land - Real Estate Investment Trusts
Imp.Brands - Tobacco

[tjh290633]

Gengulphus, re viewtopic.php?p=169379#p169379 the fifth was WPP (moneysupermarket), where his rejected choice is financial of a sort.

TJH

[Gengulphus]

Gengulphus, re viewtopic.php?p=169379#p169379 the fifth was WPP (moneysupermarket), where his rejected choice is financial of a sort.

Ah, thanks. Have to say though that I cannot really regard rejected choices as making any contribution to portfolio weightings - good thing too, as I'd hate to have to calculate my HYP weightings taking all my rejected choices into account! ;-)

Gengulphus

[Gengulphus]

I still welcome any feedback especially if there are any howlers (but I have yet again, made comparison with competitor companies).
As a matter of interest, the reason for building a HYP is so that I can at least outstrip inflation and if I realise 4% income (as things stand) then I will be happy enough. This will run alongside other investments with other objectives.

HSBC Hldgs.Uk - Banks
Greene King - Beverages
Std Life Aber - Financial Services
National Grid - Gas Water and Multiutilities
Utd. Utilities - Gas Water and Multiutilities
Barratt Devel. - Household Goods and Home Construction
WPP - Media
ITV - Media
Rio Tinto - Mining
Vodafone Grp. - Mobile Telecommunications
Direct Line - Nonlife Insurance
Royal Dutch Shell 'B' - Oil and Gas Producers
Glaxosmithkline - Pharmaceuticals and Biotechnology
Br.Land - Real Estate Investment Trusts
Imp.Brands - Tobacco

No howlers that I can see there: the yield is high, the dividend safety looks good (not perfect, of course, but there are always imperfections in dividend safety) and it looks very nicely diversified to me, with both of the sector duplications having decent within-sector diversification. (Indeed, I personally classify National Grid as an Energy Utility and United Utilities as a Water Utility: to me, the ICB split into Electricity and Gas, Water & Multiutilities seems very unhelpful, at least for HYP purposes, and so that's one of the areas in which I've modified the classification for my own use.)

Some arguable decisions, of course - but that's unavoidable: it's the essence of being arguable that if you'd made different decisions, they'd still be arguable! And there does come a point in HYP construction when one needs to decide that one has done the best one can and has better uses for one's time than agonising over it any longer...

Gengulphus

[EssDeeAitch]

I still welcome any feedback especially if there are any howlers (but I have yet again, made comparison with competitor companies).
As a matter of interest, the reason for building a HYP is so that I can at least outstrip inflation and if I realise 4% income (as things stand) then I will be happy enough. This will run alongside other investments with other objectives.

HSBC Hldgs.Uk - Banks
Greene King - Beverages
Std Life Aber - Financial Services
National Grid - Gas Water and Multiutilities
Utd. Utilities - Gas Water and Multiutilities
Barratt Devel. - Household Goods and Home Construction
WPP - Media
ITV - Media
Rio Tinto - Mining
Vodafone Grp. - Mobile Telecommunications
Direct Line - Nonlife Insurance
Royal Dutch Shell 'B' - Oil and Gas Producers
Glaxosmithkline - Pharmaceuticals and Biotechnology
Br.Land - Real Estate Investment Trusts
Imp.Brands - Tobacco

No howlers that I can see there: the yield is high, the dividend safety looks good (not perfect, of course, but there are always imperfections in dividend safety) and it looks very nicely diversified to me, with both of the sector duplications having decent within-sector diversification. (Indeed, I personally classify National Grid as an Energy Utility and United Utilities as a Water Utility: to me, the ICB split into Electricity and Gas, Water & Multiutilities seems very unhelpful, at least for HYP purposes, and so that's one of the areas in which I've modified the classification for my own use.)

Some arguable decisions, of course - but that's unavoidable: it's the essence of being arguable that if you'd made different decisions, they'd still be arguable! And there does come a point in HYP construction when one needs to decide that one has done the best one can and has better uses for one's time than agonising over it any longer...

Gengulphus

I agree on the "arguable" points and no doubt a chat over coffee or a pint would alter some choices or confirm reasoning but either way, at some stage one has to say enough. Thanks for all your help in this matter (and to the other contributors as well).