Bree's HYPish Portfolio - Christmas Review 2018

[Breelander]

Seasons greetings to all.


Time is an illusion. Lunchtime doubly so

2017 review: viewtopic.php?p=105949#p105949
(if you're really bored, you can follow the link trail starting there and back through all previous reviews)


We have normality, I repeat we have normality...

Last year I said...

This year it's just the bare figures I'm afraid...

You may be pleased relieved horrified like to know that this year the rambling monologue makes a return.


...Anything you still can't cope with is therefore your own problem

This is how my HYP looked at the close of business on 21st December 2018.

                                           Weight   Weight  Yield   Yield 
Share               Epic    Sector         by Cap.  by div* Hist*   F/cast*
Electrocomponents   ECM   support serv.    8.2%     4.3%   2.6%   2.6%
Persimmon           PSN.L constr&mat       6.6%     7.5%  12.6%   5.9%
Diageo              DGE   beverage         6.3%     2.9%   2.3%   2.3%
Unilever            ULVR  food prod/proc   5.9%     3.8%   3.1%   3.1%
Reckitt Benckiser   RB.   H/hold goods     5.6%     3.0%   2.7%   2.7%
BAe Systems         BA.   aero/defence     5.3%     5.1%   4.8%   4.8%
Shell               RDSB  oil&gas prod.    5.0%     6.3%   6.1%   6.2%
Lloyds 9.75% pref.  LLPD  fixed int.       4.9%     6.6%   6.8%   6.8%
Glaxo Smithkline    GSK   pharm/biotec     4.5%     4.8%   5.5%   5.5%
Rio Tinto           RIO.L mining           3.9%     4.4%   6.0%   5.6%
United Utilities    UU.   util gas/water   3.9%     4.2%   5.3%   5.3%
Aviva               AV.   ins. life        3.7%     5.6%   7.7%   7.7%
IMI                 IMI   indust. eng.     3.4%     2.9%   4.4%   4.4%
British Land        BLND  REITs            3.3%     3.8%   5.6%   5.7%
SSE plc             SSE   util.electricity 3.3%     5.9%   9.1%   9.2%
BT Group            BT.A  tel.fix          3.0%     3.7%   6.1%   6.1%
Pearson             PSON  media            2.9%     1.1%   1.9%   1.9%
Vodaphone           VOD   tel.mob          2.7%     4.6%   8.3%   8.3%
Halfords            HFD   retail gen.      2.7%     3.8%   7.1%   7.0%
RSA Insurance Gp.   RSA   ins. gen         2.6%     2.1%   4.1%   4.1%
Marks & Spencer     MKS   retail gen.      2.4%     3.6%   7.4%   7.4%
Lloyds Group        LLOY  banks            2.4%     2.8%   6.0%   5.9%
Tesco               TSCO  retail food/drg  1.5%     0.6%   1.9%   1.9%
De La Rue           DLAR  support serv.    1.4%     1.6%   6.0%   6.0%
Centrica            CNA   util gas/water   1.3%     2.3%   8.9%   8.9%
Wood Group (John)   WG.   Oil equip/serv.  1.3%     1.3%   4.7%   5.0%
Sainsbury (J)       SBRY  retail food/drg  1.3%     1.0%   3.9%   3.9%
Barclays            BARC  banks            0.7%     0.4%   2.9%   2.9%
Current Yield*: 17 Dec 2018        median: 3.28%           5.44%  5.01%

* Definitions:
Historic Yield: the trailing twelve-month yield (ttm) - sum of latest declared dividends over past year. May contain dividends from two reporting years.
Forecast Yield: My own conservative forecast for next year. Basically same as Historic, except where there is an explicit dividend policy. My 'forecast' for Persimmon's yield is based on their declared Capital Return Plan. My 'same as last year' forecast for AMFW isn't believed by the market, which currently forecasts around 7%.
Current Yield: Historic Yield / current portfolio value.
Weight by Dividend: calculated using my forecast yield.

[Breelander]

Costs: Costs this year were higher. As expected, all my brokers have now transitioned to a fee structure based on a percentage of the portfolio. Total management fees (including one deal) were 0.099% of the portfolio's starting value for the year (at Christmas 2017). Last year this figure was 0.029%.

Capital: The HYP fell in value over the year. The Income Unit value fell by 15.3% compared to a fall of 11.9% for the FTSE100.


Income: The HYP's trailing income per unit as calculated from the Trailing Twelve-month yield (ttm) shows a rise of 6.20%. On the basis of money in the bank and actual payment dates the gross dividend/unit for 2018 was 6.581p (2017: 6.191p), against the 6.524p indicated by the ttm yield. After deducting costs the net dividend/unit was 6.452p, a rise of 4.8% (2017: 6.152p). The actual income is different from the Trailing income because the ttm yield is based on declaration dates while actual dividends received use the pay dates. Shares (such as BT) that both declare an increased dividend and have declaration and pay dates that straddle the calendar year-end are to blame. Starting in my 2012 review I restated my figures from earlier years in Income Unit and Trailing Yield terms. Note that the 'Income(p) per Unit' figures are calculated by from the 'Trailing Yield' and the 'Unit Price'.

            # Units   Unit   Trailing Income(p)  FTSE      Year-on-year rise (fall)
   Date    (rebased) Price(p) Yield   per Unit   100   Price  Inc./unit  FTSE  Dec.RPI
24 Dec 2007   38.8   136.33   4.95%   6.742    6479.3     -       -       -     4.0%
24 Dec 2008   36.6    84.01   7.92%   6.656    4216.6  (38.4%)  (1.3%) (34.9%)  3.0%  [1]
24 Dec 2009   40.7    96.36   3.35%   3.227    5402.4   14.7%  (51.5%)  28.1%   2.4%  [2]
24 Dec 2010   51.7   107.73   4.11%   4.428    6009.0   11.8%   37.2%   11.2%   4.8%
23 Dec 2011  100.0   100.00   4.89%   4.894    5512.7   (7.2%)  10.5%   (8.3%)  4.8%
24 Dec 2012  103.2   115.30   4.75%   5.474    5954.2   15.3%   11.8%    8.0%   3.1%
24 Dec 2013  103.3   132.38   4.01%   5.314    6694.2   14.8%   (2.9%)  12.4%   2.6%
24 Dec 2014  103.7   133.00   4.00%   5.314    6609.9    0.5%    0.0%   (1.3%)  1.6%
24 Dec 2015  105.0   125.67   4.46%   5.599    6254.6   (5.5%)   5.4%   (5.4%)  1.2%  
23 Dec 2016  105.0   133.78   4.47%   5.974    7058.2    6.5%    6.7%   12.8%   2.2%
22 Dec 2017  105.0   140.42   4.37%   6.143    7592.7    5.0%    2.8%    7.6%   4.1% 
24 Dec 2018  104.8   118.92   5.49%   6.524    6686.0  (15.3%)   6.2%  (11.9%)  3.2% (Nov)

Notes:
[1] The trailing yield for 2008 looks so high because most dividends are from pre-crisis profits, while the unit price shows the post-crisis fall.
[2] My 2009 drop in income was exacerbated by being over-weight in financials.


Total Return: The capital fell this year by more than the ftse100. Income Units fell from 140.421p to 118.916p. The net dividend/unit was 6.452p. This gives a TR of -15.053p or -10.72% (2017: +9.56%). For comparison, over the same period the FTSE100-TR fell from 6434.5 to 5907.77 or -8.2% (2017: 12.0%).

[Breelander]

First, to fill some space by way of introduction, my personal story on discovering the ways of HYP to bore entertain you.

Although I had dabbled in Unit Trusts previously, my first actual share was the flotation of Alliance & Leicester at privatisation in 1997 (I had a mortgage with them so was entitled to subscribe). Around the same time I opened a self-select PEP (ancestor of the ISA) and started at the bottom of the investment learning curve. A year later I inherited an overweight helping of BT, though the words 'overweight' and 'diversification' were yet to enter my vocabulary. A random assortment accumulated until July 2001 when I stumbled across pyad's articles and learned the ways of HYP.

I had been struggling to make sense of this investment game. You need to understand that at the time I started buying shares the dotcom boom was in full ramp-up mode. All the conventional wisdom of 'the Wise' had it that trading was the only way to make real money. A small voice inside me said 'but surely there must be a way to choose a share you could just hold?'. After all, by then even I had heared of 'LTBH'. But there was no simple guide I could find on how to choose what to 'BH' for the 'LT'. Such advice was drowned out by the almost universal boastings postings of the 'Day Trader' crowd, going on about their latest multi-bagger and encouraging others to trade like there's no tomorrow (ironic really, as that turned out to be the case for 'dotcom' come the new millenium).

Then I read pyad and had a 'lightbulb' moment. By sheer luck I already had some HYP-worthy shares amongst the rubbish. My first intentionally HYPish purchases were LLOY & UU. By the end of 2002 I had near doubled the cash invested and had built a small but functional HYP.

In September 2008 the financial crisis hit, consensus opinion was that 'The Sky is Falling' and 'We're all Doomed'. [1] For a fleeting moment I found myself seriously considering liquidating the entire portfolio. The herd instinct was almost irresistible. Then again, where would I stash the cash? At the time the banks were expected to fall like dominoes, nowhere was safe. On balance I concluded that Blue-chips were marginally safer than Building Societies. I reasoned that both were high risk but, post-apocalypse, good shares had better recovery potential than a failed savings account.

The aftermath of the financial crisis hit a low point in 2011. For many HYP'ers, myself included, it was 'bargain time'. I doubled up my HYP to basically what it is today, an HYP sufficient to my needs. Since then it has been virtually a 'tinker free zone'. That's why the end of 2011 became my starting point for unitisation [2].

One advantage of my OCD was that I had kept all the records needed to retrospectively calculate units back to that fledgling 2002 HYP. One disadvantage of my OCD was that I felt compelled to do so. This mind-numbingly tedious task took six months (and the odd bottle of asprin) to complete.

[Breelander]

It seems de rigueur these days that every post has to make an obligatory reference to the 'B' word. So... "Brexit!" (there, I've mentioned it. I promise it won't happen again). This is not the time (or the board) to discuss 'Belgium' [3] any further, except to point out the practical aspect uncertainty has on the market. It is said that Markets hate uncertainty, and we certainly have uncertainty in spades*.

Now some have tried to second-guess the end game, and then try to second (third?) guess which (if any) of the usual (and some unusual) suspects may benefit from a hard/soft/squishy exit. It's hard enough trying to predict a company's future prospects from its own books, let alone guess the part politics could play in its prosperity. But still the siren call [4] to tinker persists (don't just sit there, do something!).

The only thing I feel capable of predicting with any certainty is that if I were to jump out of the fire there are far too many frying pans out there to avoid jumping into one. My track record on this [5] is hardly inspiring - one regret, one 'still too early to say' and one lucky guess.


* other uncertainties are available. At time of writing, all bets are off as to if/when the US government shutdown will end.


May I respectfully remind you that you've now been in that bath for over three years. Yes, well, one needs to relax a lot in a job like mine

So this 'Doris' [6] has strategically ignored the (sometimes deafening) noise this past year (don't just do something, sit there!), only stirring from slumber a single time to sell Carillion - sold on a Friday, suspended on the Monday (now that was lucky timing, even if it only netted a few hundred quid).

Diversity is your friend. While individual companies can have their ups and downs a diverse bunch should not all be doing so at the same time and in the same direction. It's the overall portfolio yield that matters, not which ones are the current heros or villans. Should they all start behaving like a herd of dead cats then we'll have a lot more to worry about than rearranging the deckchairs on the Titanic. It will be time to grab the beans and ammo and trek into the hills to find a convenient cave to cower in.


This must be Thursday, I never could get the hang of Thursdays

I usually finish off these monologues with a few thoughts on what the future may hold. To be honest, this year its hard to guess how things may pan out, here or on the other side of the Atlantic. All I can say for certain is that it looks like we'll be living in Interesting Times for some years to come.

Plus ça change, plus c'est la même chose. Holy Belgium! We are in a continuing state of Interesting Times, we can only hope they don't get too Interesting for comfort.

Despite all I've said so far, the New Year will may well see me (reluctantly) reviewing some imbalances in my HYP. I seem to have picked up some lucky 'winners' along the way, notably ECM, which may be ripe for a top-slice. Now where to put the proceeds? Note to self: see all of the above.



Share and Enjoy [8]

My thanks go to the late Douglas Adams as this year's guest headline writer.


Merry Christmas and a Prosperous New Year,

Bree.

[Charlottesquare]

Well, so long and thanks for all the fish.

[Arborbridge]

[quote="Breelander"][/quote]

What jumps out at me is the drop after the credit crunch - over 50% for income - and the fact that ten years later that income has not fully recovered. If I'm reading the numbers correctly, that is pretty severe and rather worse than TJH's outcome: I believe his income per unit recover a couple of years back. Not that it's a competition, but we all need to know the range of possibilities. All valuable information to throw into the pot as regards income reserves and how much one can draw down.

I also note your capital drop this year knocks you back to a value equivalent to about 2012-13, which it has in common with my HYP. My unit price looks like it will end up losing the same amount of progress.

Thanks for your usual witty and well written review.


Arb.

[moorfield]

Looking good Bree.

Has anyone spotted the elephant in the room yet?

[Breelander]

Has anyone spotted the elephant in the room yet?

I refer the Honourable Member to my previous answer on this matter.

[Mentallurgist]

Bravo - I really enjoyed reading this

[Arborbridge]

Looking good Bree.

Has anyone spotted the elephant in the room yet?

As I said somewhere else, one can get away with the occasional elephant as long as you don't draw attention to it

[jackdaww]

Looking good Bree.

Has anyone spotted the elephant in the room yet?

As I said somewhere else, one can get away with the occasional elephant as long as you don't draw attention to it

==============

i see no elephants.

[Raptor]

Moderator Message:
The elephant has been noted. This thread would have been better placed on Portfolio Review, with a link on here to it. Leaving for now, but please note for future. Portfolios need to comply with board guidance to be posted here. Thanks in advance. Raptor.

[Wizard]

Thank you for taking the time to provide such a comprehensive update and good read.

However, when it comes down to brass tacks if I have read the post correctly the numbers are pretty grim. Income is still lower in absolute terms than in 2007, so in real terms must be well down. Similarly the unit price is below the 2007 position again, having just crept above that level at the end of 2017. In contrast an investment in City of London Investment Trust (CTY) on 24th December 2007 would have seen income per share up from 10.3p to 17.7p and the price per unit up from 288p to 378p.

Terry.

[Arborbridge]

Thank you for taking the time to provide such a comprehensive update and good read.

However, when it comes down to brass tacks if I have read the post correctly the numbers are pretty grim. Income is still lower in absolute terms than in 2007, so in real terms must be well down. Similarly the unit price is below the 2007 position again, having just crept above that level at the end of 2017. In contrast an investment in City of London Investment Trust (CTY) on 24th December 2007 would have seen income per share up from 10.3p to 17.7p and the price per unit up from 288p to 378p.

Terry.

I guess the answer is that all portfolios vary and one shouldn't put one's eggs in one basket. I can't go back as far as Bree, but my income for year 2010 was 4.38p and this year looks like ending at 6.92, a factor of 1.57x. CTY has produced 17.7 in 2018 from 12.66 in 2010, x1.39 so on that basis and over that time my HYP is better. CTY is a favourite benchmark, but most people would not put all their money in one trust. A basket might perform better or worse: a different HYP might perform better or worse. My IT basket, for example has grown income from 2010's 5.2 to 7.12 in 2018 - a little less than CTY.(Actually, I'm surprised it isn't a lot less because CTY is one of the better "growers")

Investment is a funny old game, and it does depend on luck as well as process. ITs and HYPs vary even though they are mostly fishing in the same pond. Even more confusingly, they probably vary relative to one another over time i.e. at different epochs.

However, as you say, it's good of Bree to spend the time compiling such a useful report: we don't get as many with this longevity nor with such a consistent approach. Not many reported HYPs have a ten year of more of history. His contribution is to be cherished on this board.

Arb.

[Raptor]

Moderator Message:
posts deleted as discussing moderation. Please read the guidelines and stick to them. There are plenty of other boards for hypish portfolios. We want to keep a HYP board but you guys are making us rethink this as it is getting extremely hard to keep it going for the HYP posters. Raptor.

[Wizard]

I guess the answer is that all portfolios vary and one shouldn't put one's eggs in one basket. I can't go back as far as Bree, but my income for year 2010 was 4.38p and this year looks like ending at 6.92, a factor of 1.57x. CTY has produced 17.7 in 2018 from 12.66 in 2010, x1.39 so on that basis and over that time my HYP is better. CTY is a favourite benchmark, but most people would not put all their money in one trust. A basket might perform better or worse: a different HYP might perform better or worse. My IT basket, for example has grown income from 2010's 5.2 to 7.12 in 2018 - a little less than CTY.(Actually, I'm surprised it isn't a lot less because CTY is one of the better "growers")

Nothing I can disagree with there Arb, I would not advocate an all eggs in one basket approach, but trying to construct a more balanced comparison means almost certain hindsight bias.

Investment is a funny old game, and it does depend on luck as well as process. ITs and HYPs vary even though they are mostly fishing in the same pond. Even more confusingly, they probably vary relative to one another over time i.e. at different epochs.

I also agree that there can be significant variations in performance for portfolios constructed under the same parameters, even a single decision can make a big difference even with a degree of diversification. A decision to buy Carillion or another share would no doubt make a meaningful difference a few years down the line.

Terry

[Breelander]

Moderator Message:
The elephant has been noted. This thread would have been better placed on Portfolio Review, with a link on here to it. Leaving for now, but please note for future. Portfolios need to comply with board guidance to be posted here. Thanks in advance. Raptor.

This portfolio has traditionally been reviewed each Christmas on HYP-P since 2010. It is it's spiritual home. If it is no longer welcome here then this will be the last ever review.

[Steveam]

Thank you. An interesting, entertaining and educational read. A very minor question ... “As expected, all my brokers have now transitioned to a fee structure based on a percentage of the portfolio.” I use a number of brokers and none are % based for direct share holdings. It obviously depends on the size of the portfolio but this can become substantial sums.

One again, many thanks.

Steve

[tjh290633]

Thank you. An interesting, entertaining and educational read. A very minor question ... “As expected, all my brokers have now transitioned to a fee structure based on a percentage of the portfolio.” I use a number of brokers and none are % based for direct share holdings. It obviously depends on the size of the portfolio but this can become substantial sums.

One again, many thanks.

Steve

I hadn't noticed that. Have you been particularly unfortunate in your choice of broker, Bree?

Back when PEPs began ad valorem percentage fees were normal, but as values rose they moved to graduated fees with a cap. Now flat fees seem to have become the norm.

TJH

[TUK020]

the moenevator site covers this
https://monevator.com/compare-uk-cheape ... e-brokers/