Pickering time: new holding?

[Arborbridge]

I've found some cash down the back of a sofa - enough for some generous topups or a single holding. As it happens, this cash is in a broker account with few other holdings, giving little opportunity for topsup and one from which I do not yet draw income: the account is in effect part of my margin of safety.

The holdings in there which could be topped up are:-

VOD
SLA,
PSN
IGG
PNN
MYI (Murray International)
SOI (Schroder Oriental Income)

SLA is likely to come in for a top up very soon - all the others are fairly well up to the mark.

A new holding could be a benefit and I've checked the current status using Step-One, ruled out those shares I already own and a couple of others which don't make the cut for one reason or another. This leaves the following as front runners:

TUI
ITV (paired with WPP, and/or replacing Informa)
SMDS (Smith DS)
RIO (paired with BHP)
IMI

Does anyone know of particular concerns or alternatively big advantages of any of these? I would also consider any further options, though I would prefer forecast yield to be around 4.5% or more. As I'm not drawing income from this account, I can be more lenient on yield if the record of increases is steady.
At present RIO or SMDS float to the top of my preferences.

For the sake of putting this in context, here is my HYP ranked in capital weight, then the second table is sector weighting.



Sector distribution:-

Life Insurance                  | 10.71%
Financial Services              |  8.16%
Pharmaceuticals & Biotechnology |  7.02%
Oil & Gas Producers             |  6.60%
Food Producers                  |  6.53%
Gas, Water & Multiutilities     |  6.52%
Media                           |  6.36%
Tobacco                         |  5.72%
Banks                           |  5.52%
Food & Drug Retailers           |  5.52%
Household Goods                 |  4.31%
Beverages                       |  3.91%
Nonlife Insurance               |  3.62%
Mining                          |  3.35%
Travel & Leisure                |  3.33%
Multiutilities                  |  2.90%
Retail REITs                    |  2.76%
Electricity                     |  2.56%
Fixed Line Telecommunications   |  2.52%
Mobile Telecommunications       |  2.08%
                                |       
Total                           |   100%

Any suggests or discussion is welcome.

Arb.

[idpickering]

Hi Arb, of your chosen options I'd go for Rio Tinto to sit alongside BHP . I have held both for some time now. I topped up my Standard Life Aberdeen yesterday, and am topping up my ITV holdings this Thursday.

Ian.

[Dod101]

You already have 37 holdings I think. The last thing you need is a new holding.

Dod

[IanTHughes]

I've found some cash down the back of a sofa - enough for some generous topups or a single holding. As it happens, this cash is in a broker account with few other holdings, giving little opportunity for topsup and one from which I do not yet draw income: the account is in effect part of my margin of safety.

The holdings in there which could be topped up are:-

VOD
SLA,
PSN
IGG
PNN
MYI (Murray International)
SOI (Schroder Oriental Income)

SLA is likely to come in for a top up very soon - all the others are fairly well up to the mark.

A new holding could be a benefit and I've checked the current status using Step-One, ruled out those shares I already own and a couple of others which don't make the cut for one reason or another. This leaves the following as front runners:

TUI
ITV (paired with WPP, and/or replacing Informa)
SMDS (Smith DS)
RIO (paired with BHP)
IMI

Does anyone know of particular concerns or alternatively big advantages of any of these? I would also consider any further options, though I would prefer forecast yield to be around 4.5% or more. As I'm not drawing income from this account, I can be more lenient on yield if the record of increases is steady.
At present RIO or SMDS float to the top of my preferences.

Any suggests or discussion is welcome

Industry          |        | Sector                          |        | Company                    |      
Financial         | 28.01% | Banks                           |  5.52% | Lloyds Banking Group       | 2.79%
                  |        |                                 |        | HSBC Holdings              | 2.73%
                  |        | Financial Services              |  8.16% | Schroders (Non-Voting)     | 2.77%
                  |        |                                 |        | IG Group Holdings          | 2.70%
                  |        |                                 |        | Man Group                  | 2.69%
                  |        | Life Insurance                  | 10.71% | Legal and General Group    | 3.42%
                  |        |                                 |        | Chesnara                   | 2.98%
                  |        |                                 |        | Aviva                      | 2.49%
                  |        |                                 |        | Standard Life Aberdeen plc | 1.82%
                  |        | Nonlife Insurance               |  3.62% | Admiral Group              | 3.62%
Consumer Goods    | 20.47% | Beverages                       |  3.91% | Diago                      | 3.91%
                  |        | Food Producers                  |  6.53% | Unilever                   | 3.45%
                  |        |                                 |        | Tate and Lyle              | 3.08%
                  |        | Household Goods                 |  4.31% | Persimmon                  | 2.54%
                  |        |                                 |        | Reckitt Benckiser Group    | 1.77%
                  |        | Tobacco                         |  5.72% | Imperial Brands            | 3.29%
                  |        |                                 |        | British American Tobacco   | 2.43%
Consumer Services | 15.21% | Food & Drug Retailers           |  5.52% | Morrison (Wm) Supermarkets | 2.39%
                  |        |                                 |        | Sainsbury (J)              | 1.65%
                  |        |                                 |        | Tesco                      | 1.48%
                  |        | Media                           |  6.36% | Pearson                    | 2.40%
                  |        |                                 |        | Informa                    | 2.27%
                  |        |                                 |        | WPP                        | 1.69%
                  |        | Travel & Leisure                |  3.33% | Greene King                | 3.33%
Utilities         | 11.98% | Electricity                     |  2.56% | SSE                        | 2.56%
                  |        | Gas, Water & Multiutilities     |  6.52% | Pennon Group               | 3.06%
                  |        |                                 |        | United Utilities Group     | 1.86%
                  |        |                                 |        | Centrica                   | 1.60%
                  |        | Multiutilities                  |  2.90% | National Grid              | 2.90%
Basic Materials   |  9.95% | Mining                          |  3.35% | BHP                        | 3.35%
                  |        | Oil & Gas Producers             |  6.60% | Royal Dutch Shell 'B'      | 3.41%
                  |        |                                 |        | BP                         | 3.19%
Health            |  7.02% | Pharmaceuticals & Biotechnology |  7.02% | AstraZeneca                | 3.65%
                  |        |                                 |        | GlaxoSmithKline            | 3.37%
Telecom           |  4.60% | Fixed Line Telecommunications   |  2.52% | BT Group                   | 2.52%
                  |        | Mobile Telecommunications       |  2.08% | Vodafone Group             | 2.08%
Property          |  2.76% | Retail REITs                    |  2.76% | British Land Company       | 2.76%

You have more than enough Financials so I would not top up SLA or IGG. Consumer Goods is also at a high enough level in my view.

idpickering's suggestion of RIO looks good. However, if it were me, I would top up RDSB, with its slightly higher yield.

Hope that helps.


Ian

[Arborbridge]

You already have 37 holdings I think. The last thing you need is a new holding.

Dod

So what would you do with the capital, given the options I've outlined, plus any others you can think of?

It sounds that your choice would be to make no choice at all. BTW - I agree that I do not particularly need any more holdings, but given that it's a fair amount of cash, I want to explore every possibility, and there is no reason why an extra holding would be a disadvantage provided it is a sound choice.

Arb.

[moorfield]

I agree with Dod. 37 holdings is bloated enough, so I'd suggest any new holding added should aim to beat the yield of highest topupable one, if you rank accordingly.

[Arborbridge]

You have more than enough Financials so I would not top up SLA or IGG. Consumer Goods is also at a high enough level in my view.

idpickering's suggestion of RIO looks good. However, if it were me, I would top up RDSB, with its slightly higher yield.

Hope that helps.


Ian

Thanks for your input and the table. I wouldn't topup RDSB partly because it's weight is already 1.25x median, but much more importantly, it isn't in that broker account and I do not want a split holding. Been there - done that!

I agree about financials. I would topup SLA (which would only alter the balance slightly), but wouldn't buy a new financial as a holding.

Fortunately, I have time on my side to canvass a few opnions and give it some thought.

Arb.

[Arborbridge]

I agree with Dod. 37 holdings is bloated enough, so I'd suggest any new holding added should aim to beat the yield of highest topupable one, if you rank accordingly.

I object to bloated Define "bloated" . So, I guess TJH's HYP is "bloated" too in your view. OK, so we are a pair of bloaters. Something fishy about that

Indeed, I'd be happy with twenty sectors and two shares in each, assuming they would past muster. When you consider that an IT with fewer than about 40 shares is considered higher risk and/or conviction in make up, 37 is modest. If you are not a conviction manager with good research backing, it makes sense to have a bigger portfolio, in my view.

Actually, I'm sure Dod wouldn't agree with your advice, because his idea would be not to go up-yield and take on more potential diworsification, but to go down yield, if anything.

Arb.

[Dod101]

So what would you do with the capital, given the options I've outlined, plus any others you can think of?

You have a well balanced set of holdings; the average would be around 2.7% I guess. For me I would top up HSBC or BAT. For a new holding I would certainly be looking at Phoenix Holdings, a better bet I think than SLA (which of course you already hold). From your list of top ups, I would consider either of your ITs.

After all these choices, for me, if you are really interested in a new holding, Phoenix would be my choice but then I am not that bothered by sector concentration. As a top up (my preferred way), I would take BAT as it has a better chance of dividend growth at least over the next couple of years I think.

So don't say I am hedging my bets!

Dod

[IanTHughes]

You have more than enough Financials so I would not top up SLA or IGG. Consumer Goods is also at a high enough level in my view.

idpickering's suggestion of RIO looks good. However, if it were me, I would top up RDSB, with its slightly higher yield.

Thanks for your input and the table. I wouldn't topup RDSB partly because it's weight is already 1.25x median, but much more importantly, it isn't in that broker account and I do not want a split holding. Been there - done that!

Ah, not a measure I use. I do limit a holding to 6.5% of the whole but don't really understand this obsession with the Median. Each to their own I guess.

By the way, I should have put my mouth where my money is and mentioned VOD, which I have recently topped in January and February - I see it is already in the account in question. Apart from that, RIO does look the best of the rest.


Ian

[tjh290633]

Arb,
of your additional share candidates, I hold three. IMI did particularly well for me when I bought at a very low price. RIO has done well, and has grown to be my heaviest weight Share. SMDS has also done well and I view it as a share well placed to take advantage of the move to online marketing, as well as its involvement in paper and board recycling. I did have ITV, out of Granada by Compass, and was glad to get rid of it. I steer clear of airlines, so TUI would be off my list.

With your 37 existing holdings, my only thought is that you might like to ditch Centrica and replace it with one of the three. I have never been a lover of British Gas as a supplier and have never been tempted to invest in them.

TJH

[Arborbridge]

So what would you do with the capital, given the options I've outlined, plus any others you can think of?

You have a well balanced set of holdings; the average would be around 2.7% I guess. For me I would top up HSBC or BAT. For a new holding I would certainly be looking at Phoenix Holdings, a better bet I think than SLA (which of course you already hold). From your list of top ups, I would consider either of your ITs.

After all these choices, for me, if you are really interested in a new holding, Phoenix would be my choice but then I am not that bothered by sector concentration. As a top up (my preferred way), I would take BAT as it has a better chance of dividend growth at least over the next couple of years I think.

So don't say I am hedging my bets!

Dod

Thank you for PHNX - as you may have noticed, I do have Chesnara and am not keen on yet another financial, though it is certainly worth thinking of. It's a good point to consider: whether a dose of PHNX might be more stable than a dose of RIO.
Unfortunately, BATs is ruled out as it is in a different broker account and I do not want a split holding. Both my ITs could - probably, will - get a dollop, but they are low yield (certainly SOI is) and already quite high capital weightings.

[moorfield]

I object to bloated Define "bloated" . So, I guess TJH's HYP is "bloated" too in your view. OK, so we are a pair of bloaters. Something fishy about that

Yes I do, and I define bloated as >20 holdings. I take that suggestion from two (and a half) sources - one empirical, one anecdotal.

The "15 holdings" idea originates (I think) from a 1968 paper entitled "Diversification and the Reduction of Dispersion", by professors John Evans and Stephen Archer at the University of Washington. If I can find a publically available pdf, I'll post it, but iirc it may sit behind a paywall somewhere.

Personally I prefer to work with a minimum number and here cite Philip Carret:
http://moneyweek.com/the-worlds-greates ... ip-carret/

Never hold fewer than ten shares covering five different fields of business.

I've appropriated "fields of business" to mean "ICB industry classification", so all things being equal I shouldn't be holding more than 10% in one share or 20% in one industry, no fewer than 10 shares, which in practice obliges me to fluctuate between 15-20.

And the half source is pyad himself, although what (if any) study he based his original advice of 15-20 holdings on I don't know - perhaps he'll elaborate further for you.

Actually, I'm sure Dod wouldn't agree with your advice, because his idea would be not to go up-yield and take on more potential diworsification, but to go down yield, if anything.

So top up your ULVR, provided that your overall portfolio remains high. I'm sure Dod would not disagree with that.

[Arborbridge]

IanTHughes, of your additional share candidates, I hold three. IMI did particularly well for me when I bought at a very low price. RIO has done well, and has grown to be my heaviest weight Share. SMDS has also done well and I view it as a share well placed to take advantage of the move to online marketing, as well as its involvement in paper and board recycling. I did have ITV, out of Granada by Compass, and was glad to get rid of it. I steer clear of airlines, so TUI would be off my list.

With your 37 existing holdings, my only thought is that you might like to ditch Centrica and replace it with one of the three. I have never been a lover of British Gas as a supplier and have never been tempted to invest in them.

TJH

Mild confusion there, Terry - it's actually my (Arb's) candidates rather than Ian Hughes. My sentiment would also be against TUI.
RIO,SMDS and IMI seem likely front runners. Centrica is actually in a different broker account, but I've been pondering giving it the old he-ho for a while. Apart from the lower yield problem, I think ditching CNA for one of those three does make sense - but this is a tinkering option rather than what to do with my new capital - and I don't tinker lightly

This is giving me some useful feeback - it helps me test the water to see if I am barking up the wrong tree.

Arb.

[kempiejon]

I agree with Dod. 37 holdings is bloated enough, so I'd suggest any new holding added should aim to beat the yield of highest topupable one, if you rank accordingly.

What's the big difference between 37 and 38 though. Give the cat another goldfish. I've exceeded 40 holdings so there's always something to top up with new money but I do not have a moratorium on new holdings and occasionally new options have hove into view.

As to your question Arb looking at sectors REITs and Travel and Leisure and Mining being lowest weighted look favs, I combine the 2 types of telecoms and all the utilities and you've enough broadly financials. BT does look pretty good at these levels if you keep the fixed and mobiles distinct.
Tui pay an annual dividend so it'll be 12 months before your first pay check from them.
I've got informa, WPP and ITV, only the first being above my buy price but too low yield now, in that sector WPP with 6% odd would be my pick.
Overall RIO with near 10% inc special looks good but it's history is patchy, you've missed this most recent special so doesn't beat WPP which has an excellent growth (now stalled though) in dividend.
I have topped up SMDS as it's price has fallen.
MYI for outside FTSE100 diversification?

[Arborbridge]

I object to bloated Define "bloated" . So, I guess TJH's HYP is "bloated" too in your view. OK, so we are a pair of bloaters. Something fishy about that

Yes I do, and I define bloated as >20 holdings. I take that suggestion from two (and a half) sources - one empirical, one anecdotal.

Actually, I'm sure Dod wouldn't agree with your advice, because his idea would be not to go up-yield and take on more potential diworsification, but to go down yield, if anything.

So top up your ULVR, provided that your overall portfolio remains high. I'm sure Dod would not disagree with that.

On the first point - I really am going to agree to disagree. The reason for a larger portfolio has been discussed many times, and one good reason is manager (i.e. "me") specific risk. No way is >20 bloated - 20 is high risk - unless you happen to have the skill of a Warren Buffett. In any case, take that idea to Nick Train and ask him why he has about double that number in his portfolios.

As for ULVR, it isn't in that broker account, so the option does not arise - quite apart from the yield being too low. Interestingly, I notice it is my fourth biggest holding, so quite a big Dod-like bet already.

Thanks for your input.

Arb.

[OLTB]

Hi Arb

Tui for me - world's leading tourism group. Very steep share falls recently resulting in high yield. There is the withholding tax issue that needs to be deducted. Also, it's an annual dividend, rather than quarterly or half yearly (if that causes an issue for you - it may not (I don't mind one way or the other, but I'm in the building phase at the moment)). Can be seen as a hedge against oil price (thanks to monabri for pointing that out to me recently!). Recently stated they are looking to expand their market in South East Asia (Tui International Holidays recently launched in Malaysia). Their 'TUI 2022' strategy is focussing on digital growth and expansion in Asia (including India), South America and Southern Europe where they see expanding middle classes.

When I went to Cribbs Causeway shopping centre this weekend not many retail outlets were full (apart from Apple and Game) but the Tui shop was - that's not how to pick shares of course, but I thought it was interesting!

Cheers, OLTB.

[Arborbridge]

I am beginning to drift towards D S Smith for this particular new holding - but I will do some more deep pickering.

RIO I can leave for another day - or swap for a holding in one of my other broker accounts which has a disastrous natural resources IT within it which I need to ditch one day.

Kempiejon: Thanks for the point about the long wait for the next payout. I haven't yet checked XD dates at all.

Swapping out IMI for CNA might also work.

Arb.

[MDW1954]

Arb,

Your holdings in the IT sector amount to 0% of your HYP. Why not redress that with FTSE 100 Micro Focus, currently on a historic yield of 6%?

As for its merits, I refer you to our discussion of the company, several weeks ago.

MDW1954

[moorfield]

In any case, take that idea to Nick Train and ask him why he has about double that number in his portfolios.

Nick Train has also said

What we do is much riskier than the average portfolio

https://portfolio-adviser.com/nick-trai ... portfolio/

So swings and roundabouts.

You're right - we should agree to disagree.