My HYP as of now.

[dealtn]

... but if there is a bid, this could be one of those annoying cases in which the price still does not compensate existing long term investors like us, who would have been happy hanging in there.

Can you explain this as this is so far away from what I would think logical I can't get my head around it.

If someone offered me £7 for £4 (for instance) I would immediately see £3 profit (or 75% Total Return in what seems to have become the "currency" of language here.)

Now even if I was a HYPer (which I have always acknowledged I am not) I would think along the following lines. I have got £4 invested which provides me a yield of, say 5%, or 20p. Somebody is offering me £7, which I can invest in an alternative at say 5% (or 4.9% if you want to make the example of a "worse" company). I now get 5% but that is 35p.

Are you really claiming you would rather continue to get the 20p a year on the basis that it might at some future point increase to 35p (or 36p).

I honestly can't compute what I have got wrong. Don't take this as either an "attack" on you, or the HYP "strategy", but it's not the first time I have seen this kind of claim made here, so ask for your thinking (or someone else's), please. I think the last time I saw similar comments to yours were at the time of the Greene King takeover and was scratching my head then too.

This sounds like a provocation

All I'm saying is that at the current shareprice I am roughly 20% underwater. If someone buys the company at a 20% uplift to the current price, it will be a "generous" offer, but I'll still be underwater. That's before we consider that the NAV is at a 50% discount now. Since I do not need to realise the capital and crystalise the loss, I'd rather continue to hold for the share price to come nearer par.

Don't we always characterise people who crystalise a loss when prices are low as being mugs? By high and sell low

Arb.

No provocation intended. And no I just don't get it. We must just be "different".

I do it too but I think you suffer from price anchoring. It really doesn't matter if you bought at 500p, say, and you get "taken out" by a corporate action at 480p. If the price has been below 500p for ages, and the market has been pricing it at around 400p, then, at least in my eyes I am making 80p profit, not 20p loss.

From an accounting perspective I follow a daily mark-to-market philosophy, whilst it seems you are operating something like a "historic" basis I suppose.

But even though I would gladly never receive a dividend again I can't see how it is better for a HYPer to "prefer" 20p income to 35p. Your focus on "crystalise a loss" when the strategy is about Capital being very much secondary to income puzzles me when this aversion seems to be more important than the income uplift being offered.

[kempiejon]

The problem I find with takeovers is it forces an action, I've got to find a better share, it generally happens to my holdings that I think have clear long term value and I'd rather see that value play out long term with increasing income. Nobody ever went broke taking a profit but similarly a takeover can realise a profit below my expectation of that company's long term intrinsic value. A HYP pick offering a regularly above inflation increasing dividend is priceless if it continues to do that, a capital buy out might help but it's frying pans and fires again.

[Arborbridge]

No provocation intended. And no I just don't get it. We must just be "different".

I do it too but I think you suffer from price anchoring. It really doesn't matter if you bought at 500p, say, and you get "taken out" by a corporate action at 480p. If the price has been below 500p for ages, and the market has been pricing it at around 400p, then, at least in my eyes I am making 80p profit, not 20p loss.

From an accounting perspective I follow a daily mark-to-market philosophy, whilst it seems you are operating something like a "historic" basis I suppose.

But even though I would gladly never receive a dividend again I can't see how it is better for a HYPer to "prefer" 20p income to 35p. Your focus on "crystalise a loss" when the strategy is about Capital being very much secondary to income puzzles me when this aversion seems to be more important than the income uplift being offered.

If I actually wanted to sell a particular share, maybe I would think differently. But I had no intention of selling this one: it was bought as a long term holding and I'm happy just to see the income coming back from it. That being so, naturally having it taken off me for a price lower than I'm happy with is not something I'd choose. The fact is, that the potential buy out company has recognised that it's intrinsic worth is greater than the market appreciates at this moment and wants to capitalise on that - but I'd rather have the value for myself, even if it takes a while to "out". If they want to buy it, it should be at a price I want to sell it at, not a heavily discounted one because I would not be a willing seller at anything like the current price.

As for price anchoring: yes I understand the idea that no one cares what price you paid, and that the price you paid is irrelevant to the market. However, if you buy for 100p and sell at 80p, it's a loss - if the current price is 60p and someone offers 80p, it is just less of a loss, but still a loss.

PS some additional factors were well covered in kempiejon's post, with which I agree completely.
Arb.

[Arborbridge]

But even though I would gladly never receive a dividend again I can't see how it is better for a HYPer to "prefer" 20p income to 35p. Your focus on "crystalise a loss" when the strategy is about Capital being very much secondary to income puzzles me when this aversion seems to be more important than the income uplift being offered.

I confess, I didn't understand this part. 20p to 35p? Where's the income lift coming from?

Arb.

[Charlottesquare]

... but if there is a bid, this could be one of those annoying cases in which the price still does not compensate existing long term investors like us, who would have been happy hanging in there.

Can you explain this as this is so far away from what I would think logical I can't get my head around it.

If someone offered me £7 for £4 (for instance) I would immediately see £3 profit (or 75% Total Return in what seems to have become the "currency" of language here.)

Now even if I was a HYPer (which I have always acknowledged I am not) I would think along the following lines. I have got £4 invested which provides me a yield of, say 5%, or 20p. Somebody is offering me £7, which I can invest in an alternative at say 5% (or 4.9% if you want to make the example of a "worse" company). I now get 5% but that is 35p.

Are you really claiming you would rather continue to get the 20p a year on the basis that it might at some future point increase to 35p (or 36p).

I honestly can't compute what I have got wrong. Don't take this as either an "attack" on you, or the HYP "strategy", but it's not the first time I have seen this kind of claim made here, so ask for your thinking (or someone else's), please. I think the last time I saw similar comments to yours were at the time of the Greene King takeover and was scratching my head then too.

This sounds like a provocation

All I'm saying is that at the current shareprice I am roughly 20% underwater. If someone buys the company at a 20% uplift to the current price, it will be a "generous" offer, but I'll still be underwater. That's before we consider that the NAV is at a 50% discount now. Since I do not need to realise the capital and crystalise the loss, I'd rather continue to hold for the share price to come nearer par.

Don't we always characterise people who crystalise a loss when prices are low as being mugs? By high and sell low

Or maybe I've totally misread something and have this all the wrong way round, in which case I am embarassed

Arb.

The NAV is the bogey, it may be correct, it may be mirage (it is after all historic), it is in large part a function of the latent demand to rent the properties (investment approach), what that will be when the dust settles is the million dollar question.

Current valuation has nothing to do with your purchase price, it is all down to the demand to rent the properties owned.

[Wizard]

... but if there is a bid, this could be one of those annoying cases in which the price still does not compensate existing long term investors like us, who would have been happy hanging in there.

Can you explain this as this is so far away from what I would think logical I can't get my head around it.

If someone offered me £7 for £4 (for instance) I would immediately see £3 profit (or 75% Total Return in what seems to have become the "currency" of language here.)

Now even if I was a HYPer (which I have always acknowledged I am not) I would think along the following lines. I have got £4 invested which provides me a yield of, say 5%, or 20p. Somebody is offering me £7, which I can invest in an alternative at say 5% (or 4.9% if you want to make the example of a "worse" company). I now get 5% but that is 35p.

Are you really claiming you would rather continue to get the 20p a year on the basis that it might at some future point increase to 35p (or 36p).

I honestly can't compute what I have got wrong. Don't take this as either an "attack" on you, or the HYP "strategy", but it's not the first time I have seen this kind of claim made here, so ask for your thinking (or someone else's), please. I think the last time I saw similar comments to yours were at the time of the Greene King takeover and was scratching my head then too.

This sounds like a provocation

All I'm saying is that at the current shareprice I am roughly 20% underwater. If someone buys the company at a 20% uplift to the current price, it will be a "generous" offer, but I'll still be underwater. That's before we consider that the NAV is at a 50% discount now. Since I do not need to realise the capital and crystalise the loss, I'd rather continue to hold for the share price to come nearer par.

Don't we always characterise people who crystalise a loss when prices are low as being mugs? By high and sell low

Or maybe I've totally misread something and have this all the wrong way round, in which case I am embarassed

Arb.

I think your frequent suggestion that others are being provocative is becoming provocative in its own right.

I also think dealtn’s post was clear, logical and respectfully phrased. I completely agree with his logic. The only time it may be that his logic fails is if there is no option for securing replacement income. Your position seems to focus on a historic purchase price or value which is irrelevant at the point he bid is made. I get there may be an emotional component, but that is not necessarily logical or income maximising.

[Wizard]

No provocation intended. And no I just don't get it. We must just be "different".

I do it too but I think you suffer from price anchoring. It really doesn't matter if you bought at 500p, say, and you get "taken out" by a corporate action at 480p. If the price has been below 500p for ages, and the market has been pricing it at around 400p, then, at least in my eyes I am making 80p profit, not 20p loss.

From an accounting perspective I follow a daily mark-to-market philosophy, whilst it seems you are operating something like a "historic" basis I suppose.

But even though I would gladly never receive a dividend again I can't see how it is better for a HYPer to "prefer" 20p income to 35p. Your focus on "crystalise a loss" when the strategy is about Capital being very much secondary to income puzzles me when this aversion seems to be more important than the income uplift being offered.

If I actually wanted to sell a particular share, maybe I would think differently. But I had no intention of selling this one: it was bought as a long term holding and I'm happy just to see the income coming back from it. That being so, naturally having it taken off me for a price lower than I'm happy with is not something I'd choose. The fact is, that the potential buy out company has recognised that it's intrinsic worth is greater than the market appreciates at this moment and wants to capitalise on that - but I'd rather have the value for myself, even if it takes a while to "out". If they want to buy it, it should be at a price I want to sell it at, not a heavily discounted one because I would not be a willing seller at anything like the current price.

As for price anchoring: yes I understand the idea that no one cares what price you paid, and that the price you paid is irrelevant to the market. However, if you buy for 100p and sell at 80p, it's a loss - if the current price is 60p and someone offers 80p, it is just less of a loss, but still a loss.

PS some additional factors were well covered in kempiejon's post, with which I agree completely.
Arb.

My bold.

Well how perverse, the self proclaimed non-HYPer is focussing on income, whereas you, the HYPer, seems to be looking for a capital gain. Funny old board this.

[Arborbridge]

I think your frequent suggestion that others are being provocative is becoming provocative in its own right.

I also think dealtn’s post was clear, logical and respectfully phrased. I completely agree with his logic. The only time it may be that his logic fails is if there is no option for securing replacement income. Your position seems to focus on a historic purchase price or value which is irrelevant at the point he bid is made. I get there may be an emotional component, but that is not necessarily logical or income maximising.

I take your point about "provocative", but I have to bare in mind also that peopple are and have been provocative which is where the trouble all started on HYP-P - so one can hardly be blames for being sensitive to it. However, I'll take your point and not labour it in future, especially if you are not provocative!

As regards the question of whether one is making a "loss" or not, it's true no one cares what price you paid, but an accountant would still say you've made a loss. In the same way that you would if your house was worth less than you paid, because the market had dropped and you were forced to sell at the wrong time. If someone offered you a little more than the market because they wanted the house, all that's happened is that you would have made less of a loss, but it's still a loss.

The alternative argument isn't about whether one has made a loss - of that there can be no doubt - it's about the best way to proceed, and that is just a matter of personal judgement. Hang on for the restoration of the dividend, or for the knees to stop jerking, or whatever, or sell to the highest bidder. A bid for the company takes this choice away from one, and it is regrettable if it does so at a loss.

As for the jibe in your second post about capital: it's just not worth answering.

PS I still didn't understand the 20p-35p income part - did you?
Arb.

[Wasron]

PS I still didn't understand the 20p-35p income part - did you?
Arb.

I think the 20p referred to 4% of a £5 purchase price, perhaps a historic example of BLND, while the 35p was reference to a riskier share (hence 5%) using the premium for the takeover to buy a higher level of income.

That’s my guess anyway

Wasron

[Arborbridge]

PS I still didn't understand the 20p-35p income part - did you?
Arb.

I think the 20p referred to 4% of a £5 purchase price, perhaps a historic example of BLND, while the 35p was reference to a riskier share (hence 5%) using the premium for the takeover to buy a higher level of income.

That’s my guess anyway

Wasron

Thanks, maybe. A good guess.
If so, not my only choice: a HYPer would tend to go towards self healing as a first consideration, or if the dividend is lost for the forseable, only then think what else one might do.

[Wizard]

I think your frequent suggestion that others are being provocative is becoming provocative in its own right.

I also think dealtn’s post was clear, logical and respectfully phrased. I completely agree with his logic. The only time it may be that his logic fails is if there is no option for securing replacement income. Your position seems to focus on a historic purchase price or value which is irrelevant at the point he bid is made. I get there may be an emotional component, but that is not necessarily logical or income maximising.

I take your point about "provocative", but I have to bare in mind also that peopple are and have been provocative which is where the trouble all started on HYP-P - so one can hardly be blames for being sensitive to it. However, I'll take your point and not labour it in future, especially if you are not provocative!

As regards the question of whether one is making a "loss" or not, it's true no one cares what price you paid, but an accountant would still say you've made a loss.

I hold most of my investments through a limited company and a few years back the rules changed. Where I have made a gain on investments there is now a deferred tax balance which is only payable on disposal, if in a year I make a loss versus the prior year the deferred tax balance is reduced reflecting the loss. The value of the assets on the balance sheet also reflects the value at the balance sheet date, not the historic value. The gains and losses do not run through the P&L given that the tax is deferred, but the value in my books is not the purchase price. If a share I bought for £10 had a market price of £5 at then end of last year but is acquired for £8 during this year, my accounts would show that as an increase in the assets on my balance sheet, £8 in cash versus the previous £5 in shares, less the additional tax charge for the £3 increase. I think your understanding of accounting is a little out dated. But this is now getting very off topic.

In the same way that you would if your house was worth less than you paid, because the market had dropped and you were forced to sell at the wrong time. If someone offered you a little more than the market because they wanted the house, all that's happened is that you would have made less of a loss, but it's still a loss.

The alternative argument isn't about whether one has made a loss - of that there can be no doubt - it's about the best way to proceed, and that is just a matter of personal judgement. Hang on for the restoration of the dividend, or for the knees to stop jerking, or whatever, or sell to the highest bidder. A bid for the company takes this choice away from one, and it is regrettable if it does so at a loss.

As for the jibe in your second post about capital: it's just not worth answering.

There you go again, you don’t like a comment so instead of responding you attack the poster’s motives. Now suggesting it was a jibe rather than the more usual suggestion of deliberate provocation. Dealtn was clearly focussing on income, when you say you want to hold on to a share as the market has not correctly valued it and you are waiting for the value to “out” we’re you not referring to capital?

PS I still didn't understand the 20p-35p income part - did you?
Arb.

Yes, I’m not really sure why others didn’t. If you hold a share priced at £4 with a yield of 5% you must be getting 20p per share in income. If somebody makes a bid for the company offering £7 per share and you reinvest the £7 in one or more other shares also paying a 5% yield your income will be 35p.

[Itsallaguess]

PS I still didn't understand the 20p-35p income part - did you?

I think the 20p referred to 4% of a £5 purchase price, perhaps a historic example of BLND, while the 35p was reference to a riskier share (hence 5%) using the premium for the takeover to buy a higher level of income.

That’s my guess anyway

I don't think so.

Dealtn was talking about a share that was previously £4 and with a yield of 5% being taken over with a buy-out price of £7, and then that takeover-capital being moved over to another different share yielding exactly the same at 4%, but obviously now with a larger amount of capital...

Example here -

Share Price     Capital Value        Shares held          Yield      Dividend     Total dividend income 
    £4             £10,000              2,500               5%          20p               £500

The share is taken over with £7 per-share buyout, so that £10,000 turns into £17,500 (2,500 shares x £7)

Then re-invest the £17,500 into a different share yielding exactly the same yield of 5% (so no additional 'yield risk' with the new investment...) - (note, I've used a new share with the same £4 share price for this example, so as to maintain the point Dealtn is wishing to make..)

Share Price     Capital Value        Shares held          Yield      Dividend      Total dividend income
    £4             £17,500              4,375               5%          20p               £875

If you divide that final £875 final dividend income by the number of shares owned originally, you get an 'end-result dividend' of 35p per (original) share from the takeover occurring and then an investor rolling the takeover capital into a share yielding exactly the same yield as the original (pre-takeover) share (5% yield) -

£875 / 2,500 = 35p

Just for clarity, and in a similar 'area' of income-investment - any HYP owner who has ever seen a share price of one of their holdings race ahead of the accompanying dividend payout might perhaps have similarly seen a holding with a 'current yield' of perhaps 5% drop well down to perhaps then 'currently yielding' a much lower percentage yield, and in those circumstances a similar 'sell-and-reinvest' process might be carried out to 'ratchet up' a given level of income than was being seen with the original holding capital...

I've experienced this a number of times with my income-portfolio, and where shares might start to drop below the 3% yield level, and if that's primarily due to a rise in share price that's led to that yield dropping, then I will often look to sell out and move capital over to an investment with a more 'normal yield' when compared to the rest of my income-portfolio holdings.

It's similar in that in those situations, I see it as 'the market' carrying out the 'takeover', rather than a more traditional 'buyout' occurring, but the symptoms are the same, as is the end result - which is a ratcheting up of income when these types of processes are carried out...

As an aside - I know Dealtn can see 'no issues' at all with the above process, and as someone who's carried it out a number of times, I see it as a normal part of a long-term income-strategy, where one or other of the above is likely to happen a number of times over a lengthy investment 'career', but I wouldn't go as far as to say there are 'no issues' with it, because sometimes we can be happy with the diversification of our portfolio before these events occur, and the re-investment process can sometimes introduce some problems in that area, where there may perhaps not be any decent 'natural fit' re-purchase options for the reinvested capital.

That's not to say that it's proved to be an insurmountable issue where these events have occurred for me, but they've sometimes been enough of a head-scratcher for me to definitely move it from the 'no issues at all' pile, and onto the 'some issues, but nothing too difficult' pile....

Cheers,

Itsallaguess

[Arborbridge]

As for the jibe in your second post about capital: it's just not worth answering.

There you go again, you don’t like a comment so instead of responding you attack the poster’s motives.

I usually do reply to comments, so it's not "there you go again" but in this case there's really no point. And if you can't see that you made a jibe, that could be part of the problem.

It's been pointed out to me, that the best way not to prolong arguments is simply not to engage "it takes to to tango" as Itsallaguess wrote. When one does not answer a point such as the one you tried to make, then that leaves it open for some one to respond "there you go again..."etc etc: Can't defend, won't defend.

So, I repeat, I am simply not engaging, not because I have nothing to say on the matter, but because the point you made was baseless and I don't want to waste the effort or sully the board any further than it already is with unhelpful and distracting arguments!

As they say: nuff said. You can argue with yourself from now on.

Arb.

[Wizard]

Your quoting is all messed up, you may want to use Preview in future to check what you have drafted before you submit it as the way it is now makes your post unintelligable.

Moderator Message:
So was yours, Wizard, so I have deleted the incorrectly edited post. I have corrected the original post above.

TJH

[Arborbridge]

Your quoting is all messed up, you may want to use Preview in future to check what you have drafted before you submit it as the way it is now makes your post unintelligable.

Moderator Message:
So was yours, Wizard, so I have deleted the incorrectly edited post. I have corrected the original post above.

TJH

I'm sorry if the quoting was messed up, but I expect you got the drift nevertheless. Indeed thanks to TJH who corrected it, thus showing that it wasn't unintelligible after all.


Arb.

[Wizard]

Your quoting is all messed up, you may want to use Preview in future to check what you have drafted before you submit it as the way it is now makes your post unintelligable.

Moderator Message:
So was yours, Wizard, so I have deleted the incorrectly edited post. I have corrected the original post above.

TJH

Only because I quoted the original.

[Wizard]

As for the jibe in your second post about capital: it's just not worth answering.

There you go again, you don’t like a comment so instead of responding you attack the poster’s motives.

I usually do reply to comments, so it's not "there you go again" but in this case there's really no point. And if you can't see that you made a jibe, that could be part of the problem.

It's been pointed out to me, that the best way not to prolong arguments is simply not to engage "it takes to to tango" as Itsallaguess wrote. When one does not answer a point such as the one you tried to make, then that leaves it open for some one to respond "there you go again..."etc etc: Can't defend, won't defend.

So, I repeat, I am simply not engaging, not because I have nothing to say on the matter, but because the point you made was baseless and I don't want to waste the effort or sully the board any further than it already is with unhelpful and distracting arguments!

As they say: nuff said. You can argue with yourself from now on.

Arb.

OK, well forget the alleged "jibe", the substantive point is still that you seem to be suggesting you would prefer to wait for capital value to "out" by a company not being subject to a bid. The alternative is to receive a higher price than the market was preferred to offer before the bid. That higher amount of capital can be redeployed to deliver more income, which I would have thought would be a good thing for somebody using an income strategy to deliver an income they live on.

If HYP were a Total Return strategy there would be a logic to what you say, if you believe the capital increase will be more than the higher income for the period between the bid and the value you perceive "outing". But HYP is not a Total Return strategy. So again, in the context of HYP and the HYP-P board I do not see the logic of your point. If you are following an HYP approach then why is the higher income not preferable, or put another way, if you have a preference for a potential capital increase in the future over a higher income now, is that HYP?

I am not arguing about the merits of HYP versus other strategies, which was the context of the "it takes two to tango" comment. What I am trying to understand is how your stated view fits with the HYP strategy.

[Arborbridge]

the substantive point is still that you seem to be suggesting you would prefer to wait for capital value to "out" by a company not being subject to a bid. The alternative is to receive a higher price than the market was preferred to offer before the bid. That higher amount of capital can be redeployed to deliver more income, which I would have thought would be a good thing for somebody using an income strategy to deliver an income they live on.

With recognition of what Ian has just posted, I think Wizard and I can put this one to bed now and move on.

Yes, given the choice, I would rather wait for the capital to "out" - though in a take over, beggars can't be choosers. The former is what the HYP strategy calls for as a preference: let the share self-heal - and that is what I would prefer to do.

Naturally, if it gets taken over at a higher that the current market price, I will have more income, but left to my own devices, I'd wait for the dividend either to come back or, if there is no sign of its doing so, look at my options at that time. While I can understand some of the dissection of what I've written, in one sense this is blaming the messenger - all I'm doing is following normal HYP practice, but commenting that I would rather not have action forced on me by an outside body in a take over.

Redeploying capital (whether one has made a loss on the purchase or not) is also part of our normal HYP practical technique, so the idea put forward by Dealtn is not foreign to me. But I'd rather judge the circumstances and timing for myself.

I trust this brings the discussion to a conclusion.

Arb.

[idpickering]

the substantive point is still that you seem to be suggesting you would prefer to wait for capital value to "out" by a company not being subject to a bid. The alternative is to receive a higher price than the market was preferred to offer before the bid. That higher amount of capital can be redeployed to deliver more income, which I would have thought would be a good thing for somebody using an income strategy to deliver an income they live on.

With recognition of what Ian has just posted, I think Wizard and I can put this one to bed now and move on.

Yes, given the choice, I would rather wait for the capital to "out" - though in a take over, beggars can't be choosers. The former is what the HYP strategy calls for as a preference: let the share self-heal - and that is what I would prefer to do.

Naturally, if it gets taken over at a higher that the current market price, I will have more income, but left to my own devices, I'd wait for the dividend either to come back or, if there is no sign of its doing so, look at my options at that time. While I can understand some of the dissection of what I've written, in one sense this is blaming the messenger - all I'm doing is following normal HYP practice, but commenting that I would rather not have action forced on me by an outside body in a take over.

Redeploying capital (whether one has made a loss on the purchase or not) is also part of our normal HYP practical technique, so the idea put forward by Dealtn is not foreign to me. But I'd rather judge the circumstances and timing for myself.

I trust this brings the discussion to a conclusion.

Arb.

I'm gobsmacked that my post to which you refer has disappeared Arb, with no explanation. I fear I'm at the dusk of me bothering coming here at all.

Ian.

[tjh290633]

Your quoting is all messed up, you may want to use Preview in future to check what you have drafted before you submit it as the way it is now makes your post unintelligable.

Moderator Message:
So was yours, Wizard, so I have deleted the incorrectly edited post. I have corrected the original post above.

TJH

Only because I quoted the original.

No, you perpetuated the problem, wrongly attributing the remarks.

TJH