HYP Process examples - where would anyone start?

[pyad]

Doris inherited her shares. She did not have to make a single purchase decision and did not want to. She simply collected the dividends and other cash proceeds - lapsed rights etc.

Ian

Ian is dead right. The reason I featured Doris is because she left her shares alone forever, not at all because she understood shares or accounts etc. Quite the contrary, she had no interest in any of that. Her strength lay in doing nothing, ever, and it was this aspect which served her so well.

But, like a lot of what I've said on the subject over the 20 years since I launched the HYP concept back on the old Motley Fool, my comments have often become perverted, both by those who misunderstand due to not having taken the trouble to find out properly though I've written so much that perhaps it's understandable and also, more insidiously, by a small minority who do know the facts yet deliberately misconstrue them to some personal, emotional end.

[tjh290633]

In viewtopic.php?p=196324#p196324 lootman said that he never looks at annual reports. In my experience this is seldom needed because RNS posts provide virtually all the data that one needs. Other data may be found on the company website, such as that relating to corporate actions, where a letter to shareholders or a circular may be the only source.

The extra information held in the annual reports is seldom relevant to investment decisions.

It still remains true that it is essential to check with the horse's mouth that information from third parties is correct. There have been plenty of examples in the past where currencies have been assumed to be sterling or where quarterly dividends have been ignored.

This applies to both ends of the spectrum, high yields and low yields.

TJH

[pyad]

In viewtopic.php?p=196324#p196324 lootman said that he never looks at annual reports. In my experience this is seldom needed because RNS posts provide virtually all the data that one needs. Other data may be found on the company website, such as that relating to corporate actions, where a letter to shareholders or a circular may be the only source.

The extra information held in the annual reports is seldom relevant to investment decisions.

It still remains true that it is essential to check with the horse's mouth that information from third parties is correct. There have been plenty of examples in the past where currencies have been assumed to be sterling or where quarterly dividends have been ignored.

This applies to both ends of the spectrum, high yields and low yields.

TJH

Agreed. It was primarily the RNS results to which I was referring when I said it was essential to follow up a database filter selection with an appraisal of the accounts and later news. That's because RNS results are the accounts, in abbreviated form, though occasionally one does need to go back to the full job for some details.

It's fine to use a database for an initial idea but subsequently buying an HYP share purely on that basis, without as you say going back to the horse's mouth, is just foolish because of the errors they contain.

[Lootman]

Doris inherited her shares. She did not have to make a single purchase decision and did not want to. She simply collected the dividends and other cash proceeds - lapsed rights etc.

Ian is dead right. The reason I featured Doris is because she left her shares alone forever, not at all because she understood shares or accounts etc. Quite the contrary, she had no interest in any of that. Her strength lay in doing nothing, ever, and it was this aspect which served her so well.

Except that there are always involuntary corporate actions which throw off cash, which then need to be reinvested. So the idea that you can have a portfolio without ever buying any shares is naive, even if you buy into the notion that you should never adjust or re-balance the portfolio, which people here disagree about.

And of course for almost everyone here, they did not inherit their shares, but rather purchased them. You stated earlier that such buy decisions involve looking at the corporate accounts. I doubt that is the case for most here because, as others have stated, there are more amenable and convenient sources of such data, for those who need it to make decisions.

[kiloran]

Doris inherited her shares. She did not have to make a single purchase decision and did not want to. She simply collected the dividends and other cash proceeds - lapsed rights etc.

Ian is dead right. The reason I featured Doris is because she left her shares alone forever, not at all because she understood shares or accounts etc. Quite the contrary, she had no interest in any of that. Her strength lay in doing nothing, ever, and it was this aspect which served her so well.

Except that there are always involuntary corporate actions which throw off cash, which then need to be reinvested. So the idea that you can have a portfolio without ever buying any shares is naive, even if you buy into the notion that you should never adjust or re-balance the portfolio, which people here disagree about.

And of course for almost everyone here, they did not inherit their shares, but rather purchased them. You stated earlier that such buy decisions involve looking at the corporate accounts. I doubt that is the case for most here because, as others have stated, there are more amenable and convenient sources of such data, for those who need it to make decisions.

I feel you are looking at HYP rather too deeply.

Doris would surely have just treated the cash from corporate actions as if they were dividends. Seasoned investors may roll their eyes at such an amateurish practice, but for Doris it would be quite reasonable.

The two most important things I have learnt from Doris are:

1. Inactivity can often be better than frequent buying and selling. I used to think I was smart buying and selling shares, but the hard facts prove otherwise.
2. I don't want to spend ages poring over accounts and doing a fancy analysis, so I'm a great believer in Strategic Ignorance. I know what I don't know. That makes buying relatively easy. And concerns about selling are often covered by Item 1

--kiloran

[Lootman]

The two most important things I have learnt from Doris are:

1. Inactivity can often be better than frequent buying and selling. I used to think I was smart buying and selling shares, but the hard facts prove otherwise.
   
2. I don't want to spend ages poring over accounts and doing a fancy analysis, so I'm a great believer in Strategic Ignorance. I know what I don't know. That makes buying relatively easy. And concerns about selling are often covered by Item 1

I agree with those principles and in fact they apply to a broad range of investing styles and strategies. In my view they derive from and restate the Fama-French work on efficient markets, Malkiel's Random Walk work, and mirror the massive growth of index funds, passive investing and ETFs. The idea quite simply is that most of the time there is no extra reward to be gained from endlessly studying the markets, companies or shares, nor from reacting to news that is in the public domain.

So without wishing to get into the active/passive debate, I do not believe that most individual investors can get an edge by poring over balance sheets and company accounts. I don't try. I do believe that I can add value by high-level activities like asset allocation and risk management. And so presumably do those who select something like HYP over simply buying an index fund and then falling asleep for a few decades.

[monabri]

Doris would surely have just treated the cash from corporate actions as if they were dividends. Seasoned investors may roll their eyes at such an amateurish practice, but for Doris it would be quite reasonable.

--kiloran

And simply left it to Pyad to sort out with the tax man!