The Lemon Fool

Very unusual for me to trade, or post for that matter, but this morning I decided to clear the Utilities from my HYP. I have sold my holdings of SSE, Severn Trent and National Grid and topped up holdings in British Land, HSBC, GSK and Vodafone.
The political risk in holding Utilities now seems too great, to me at least.
I’ve held them for 7 or 8 years, SVT has produced a great Capital Gain, SSE a substantial loss and NG is a break even, all though have generated substantial dividends.

My HYP, pretty much the usual suspects I suppose, now consists of 18 shares, as follows:
Ashmore
Astra Zeneca
BAE Systems
BHP Billiton
British American Tobacco
British Land
BP
Compass
Diageo
Glaxo Smithkline
Greene King
Imperial Brands
HSBC
Rio Tinto
Royal Dutch Shell
TP ICAP
Unilever
Vodafone

Regarding diversification, I should also point out that I hold other non HYP shares from AIM to large caps and a much larger IT portfolio.

Minesadouble wrote:Very unusual for me to trade, or post for that matter, but this morning I decided to clear the Utilities from my HYP. I have sold my holdings of SSE, Severn Trent and National Grid and topped up holdings in British Land, HSBC, GSK and Vodafone.
The political risk in holding Utilities now seems too great, to me at least.
I’ve held them for 7 or 8 years, SVT has produced a great Capital Gain, SSE a substantial loss and NG is a break even, all though have generated substantial dividends.

My HYP, pretty much the usual suspects I suppose, now consists of 18 shares, as follows:
Ashmore
Astra Zeneca
BAE Systems
BHP Billiton
British American Tobacco
British Land
BP
Compass
Diageo
Glaxo Smithkline
Greene King
Imperial Brands
HSBC
Rio Tinto
Royal Dutch Shell
TP ICAP
Unilever
Vodafone

Regarding diversification, I should also point out that I hold other non HYP shares from AIM to large caps and a much larger IT portfolio.

Well done Minesadouble, peace of mind is important. I wonder if others will follow your lead? If I were do so I think I’d struggle to find a new home for the monies released. You’ve shown us an option, how many will follow on?

Ian.

Thanks Ian.
No great insight on my part, just how I’m reading the tea leaves at present.
I remind myself that my worst HYP decision was when I followed Strategic Ignorance (Tesco, where I really did know better) and my best was when I disregarded S.I. and divested early (Carillion).

Topical - as I have been thinking about this for some time and then this post and today John McDonnell's speech.

I think what is stopping me selling utilities at the moment is that I can't see Labour in power until 5th May 2022 at the earliest and even then they may not get there.

There could well be other reasons for selling some utilities in the HYPs e.g. the Water regulator seems to be cracking down.

Of course another issue is what do we define as utilities - energy companies could theoretically include BP, (but look at the market cap of that) BT (would they want those pension liabilities back....

At the moment at least with regards to politics I think utilities are fine in HYP assuming they meet the usual criteria.

Minesadouble wrote:The political risk in holding Utilities now seems too great, to me at least.

You can mitigate that political risk differently I suggest:

Don't vote Labour.

idpickering wrote:

Minesadouble wrote:. You’ve shown us an option, how many will follow on?

Ian.

I had too many utilities and chose, with a heavy heart, to sell half 4 months ago fearing a Corbyn government.

As it happened I needed some temporary cash to help fund a property buy on the basis that I would get the cash back on the subsequent sale of our existing house. As it happens, quite unexpectedly, the property deal was highly profitable and I got back some of the lost value on my utilities. I'm still down of course.

I am contemplating dividing the proceeds between MYI, HFEL and VAPX. The thinking is to balance my international holdings and, of course, get some divis. Currently, I have no faith in UK governments and am boosting my overseas shares..

It's impossible to know what to do with the remaining utes. In this environment anything can happen. As investors we need to take a detached view. If Labour look like winning the next election, ute shares will drop substantially and the government will fund subsequent bargain acquisitions with gilt sales. On the other hand, opinion polls suggest Labour is behind what must be the most incompetent government in living memory.

I think I am going to hold on but this could change at any time.

TP2.

... and interesting to see Unite Union's pension scheme is ~30% equities (2016).

UPS Newsletter.pdf

Wonder how much of that is in utilities.

idpickering wrote:If I were do so I think I’d struggle to find a new home for the monies released.

In general if political risk is considered relevant then other UK businesses may be under some kind of threat as well. It's just that utilities are first in line. But consider also Labour's plans to start compelling companies to issue shares to workers, which will cause dilution. And Labour has threatened to reverse the Tory cuts in corporation tax, give unions more power and increase regulation.

If that all comes about it might be the time to relax the rules on excluding foreign shares. Both the US and the EU have some successful utility companies that pay decent dividends, for instance.

Lootman wrote:

idpickering wrote:If I were do so I think I’d struggle to find a new home for the monies released.

In general if political risk is considered relevant then other UK businesses may be under some kind of threat as well. It's just that utilities are first in line. But consider also Labour's plans to start compelling companies to issue shares to workers, which will cause dilution. And Labour has threatened to reverse the Tory cuts in corporation tax, give unions more power and increase regulation.

If that all comes about it might be the time to relax the rules on excluding foreign shares. Both the US and the EU have some successful utility companies that pay decent dividends, for instance.

I'm not bothered at this stage about employee shareholding and dilution. I think the effect on my personal wealth will be greater if they nationalise utes than that - giving me a shoddy bond of low coupon and little value means a virtual write-off rather than a dilution. So I must consider my position at least of water companies, of which I have two.

I found the CBI spokesman amusing in a black comedy sort of way. Employees earning their shareholdings by putting in work would dilute the shareholdings? - but do they rant against incentive schemes for already wealthy directors which also dilute our holdings? Why is it the rich need further incentives to turn up for work, but similar incentives for employees are somehow unwholesome? Hypocrites.

In general, I am not opposed to employee shareholdings and believe the effect could be beneficial to companies. Compulsion isn't a good way to go, but most advances in society have been backed up by regulation from banning boyhood chimneysweeps forwards. Every time we get a social advance, those with power and much to loose whinge about it.

Arb.

I only hold two utilities, National Grid and SSE and I sold about half of my SSE on purely company fears earlier this year, before their profit warning. As I have said I will sell the rest if the price recovers a bit (which it is doing to some extent)

Have never held a water company.

Corbyn? Easy to stand on a platform and spout. It may never happen and in fact they are at least as disjointed as the Conservatives. If they ever get power it will be a disorganised, incompetent f*** up, good for no-one.

Dod

Arborbridge wrote:In general, I am not opposed to employee shareholdings and believe the effect could be beneficial to companies.
Arb.

Interest that the market guest on the Today business news this morning also seemed quite sanguine about Labour's employee share ownership proposal.

I am still of the opinion that any hit from this proposal will be far less damaging than the losses I may suffer from re-nationalisation: HYP investing will take it in it's stride.

Dod: Corbyn is doing what Thatcher did - finding "enemies" to shoot at and score easy points - but of course from the left rather than right POV. Just like the Tories rabble rousing against BTL landlords, water companies are an easy target, a whipping boy, and public will cheer them on. Unfortunately, it is likely to appeal to voters, but as you say, they still have to get into power, which is maybe why the market was fairly steady yesterday.


Arb.

I can see why you've baled MAD, it's grim reading...

https://www.londonstockexchange.com/exc ... 98500.html

Of course, the staff will all be re-employed on final salary pension schemes like our MPs enjoy..won't they?


.p.s. if they were to try to renationalise RDSB ( you mentioned. BP)...they would be following ULVR !