PYAD HYP 2019_04 REINVEST – Year 1 - November Commentary

[IanTHughes]

The latest update for this HYP constructed by pyad, as recorded on this thread: viewtopic.php?f=15&t=16868&start=140

Has been posted here viewtopic.php?p=262631#p262631

Further details of how updates are to be made to this portfolio can be found on this thread: viewtopic.php?p=218513#p218513

It struck me that there may be those that wish to comment on my management of this HYP since it was set up by pyad, back in April 2019. Comments are of course welcome although it would be appreciated if they were confined to this thread, leaving the main thread to simply record all actions taken. In due course I will add to the main thread, a link to this thread.


Ian

[SuperCally]

I have limited investing experience, but it seems to me that this is an object lesson in HYP management, and presentation for scrutiny, from which I expect to learn a lot. So, thanks again for doing this, Ian. Thanks also of course to pyad for the original HYP compilation.
Vinny

[monabri]

It will be interesting to see how XIRR pans out over a longer time period. I'd take an XIRR of 15% .....

[IanTHughes]

It will be interesting to see how XIRR pans out over a longer time period. I'd take an XIRR of 15% .....

Ah yes well, wouldn't we all! As of today the figure is 16.16%!

Of course that only goes to show how such a calculation is extremely volatile so early in the life of any portfolio. I should also tell you that the Dividend Unit Value is only marginally ahead of the re-based value for the FTSE100, even with the inclusion of the very fortuitous Realised Profit from the Greene King takeover!

Still, the Portfolio is, for the time being at least, comfortably ahead of where it started and producing a good level of income for re-investment to boot, which of course is the primary aim of the HYP Strategy.

So far so good I would say and "Steady as she goes" is my own wish!


Ian

[ElectronicFur]

Just noticed Stephen Bland commented on the GNK sale and how he would use the proceeds:

https://www.stockopedia.com/content/how ... nt=116#116

[IanTHughes]

Just noticed Stephen Bland commented on the GNK sale and how he would use the proceeds:

https://www.stockopedia.com/content/how ... nt=116#116

Thank you for bringing this to the attention of this board.

My standard approach here is to reinvest in a new share up to the current average sector value and use any surplus over that to top-up an existing share. The latter would be the most undervalued current sector that also continues to meet my purchase criteria, any top-up being limited to bringing the sector up to average value. The idea is that new cash never over-invests in any sector.

Right now, I'd use the GNK proceeds to purchase Marston's, (MARS) which is another brewing and pub group. Although a little on the small side, it otherwise looks okay including a good yield of around 6% which is well over average. You could describe their pubs as Mars Bars.

Since the GNK sale is producing a surplus over the average sector value due to the capital profit, I would invest the balance in tobacco share Imperial Brands (IMB) which has fallen quite a bit since my selection and is delivering a huge yield of around 12%. Although that sounds unsustainable, I think today's annual results from IMB suggest that the div will be maintained and that the market may have overdone the fall. No gurantees of course, as with any share.

These suggestions may change by the time the GNK cash is received but that's my current thinking.

As the person who has taken on the mantle of "running" this portfolio selected by Stephen Bland (pyad) as two HYPs - one with dividend draw down and one with dividend re-investment - I have made a different decision with regard to investing the proceeds of the Greene King (GNK) takeover. I can tell you that I did initially consider the replacement of GNK with Marston's (MARS), not least because it would be replacing one Pub Group share with another. I rejected such an idea because it was my opinion that pyad, the original creator of the portfolio, would himself have rejected MARS as too small as measured by Market Capital to be allowed. I understood that pyad would only countenance a share from the upper echelons of the FTSE250 whereas MARS ranks a rather lowly 208 by Market Capital valuation. It now appears that I was wrong in that assessment as pyad has now indicated, although maybe only because MARS is another Pub Group.

Furthermore, it was my contention that pyad would have rejected a Top Up of Imperial Brands (IMB) due to a change in dividend strategy being adopted which I believe may result in a held dividend or maybe worse, a cut. Once again I was wrong, although I must confess that in this case I am less surprised by pyad's continued selection of IMB. After all, the original portfolio did include the selection of more than one share with a dividend already held.

Oh well, we live and learn but, just to be clear, my decisions in this regard will not be reversed. The sale of GNK and reallocation of the proceeds was undertaken a month ago now and I will not introduce any possibility of acting with hindsight.

Comments are of course welcome as to how I might avoid such a divergence of opinion in the future although, as I am managing the two portfolios, it is perhaps inevitable that such divergences will occur. I am not a mind reader after all


Ian