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HYP1 is 21

For discussion of the practicalities of setting up and operating income-portfolios which follow the HYP Group Guidelines. READ Guidelines before posting
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Re: HYP1 is 21

#459399

Postby MrFoolish » November 19th, 2021, 7:39 pm

Arborbridge wrote:HYP1 is 21. Pyad has proved that this particular experiment has worked, and worked surprisngly well. Who would have predicted - apart from Pyad - that a relatively naive investor could set up a portfolio, just let it run - apart from the occasional attention due to market trading and dividend accumulation - and come out smiling.


Well, it is one particular portfolio started at one particular time. And not really a sensible one to have stuck with, given the inceasing lack of diversity. So I wouldn't get too carried away.

But yes, in general a basket of shares will outperform cash. I don't think this is any great secret.

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Re: HYP1 is 21

#459422

Postby monabri » November 19th, 2021, 8:38 pm

I calculate that HYP1 has delivered a XIRR of 8.23% per year, comprising dividends paid out and capital increase which is better than the Bank of Wedontgiveyoumuch.

(calculation performed in Excel by monabri - table of results)

Image

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Re: HYP1 is 21

#459424

Postby Gengulphus » November 19th, 2021, 8:42 pm

Bouleversee wrote:
moorfield wrote:It's easy to forget how much HYP1 has changed over the years actually. I can't remember all the corporate actions that have happened but looking back on the November 2000 scriptures, 9 of the original 15 selections have since changed.

Gallaher (LSE: GLH) Tobacco
Scottish & Newcastle (LSE: SCTN) Brewery
Royal & Sun(LSE: RSA) Insurance
Alliance & Leicester (LSE: AL.) Bank
Britannic (LSE: BRT) Insurance
Bass (LSE: BASS) Hotels
Boots (LSE: BOOT) Retail
Associated British Ports (LSE: ABP) Ports
Blue Circle (LSE: BCI) Cement

Could I just ask how these changes came about and how the replacements were arrived at? If they were all takeovers, I think at least Boots was a cash one, wasn't it, so did Pyad choose this replacement and others? Might have worked out rather differently if Doris had had to manage, which is perhaps what 1invest was driving at. Nobody responded to that post; hard to know where to start,

In the order in which the first corporate action affecting the original holding happened:

Blue Circle Industries: Taken over for cash in July 2001. The replacement pyad chose was Hilton Group; it was renamed to Ladbrokes in 2006, then merged with a substantial part of Coral to form Ladbrokes Coral in 2016. Ladbrokes Coral was then taken over by GVC in 2018, for a mixture of GVC shares, cash and 'Contingent Value Rights' - the last being a debt-like security with very messy and complex terms. Pyad decided to sell the Ladbrokes Coral holding and replace it with one of GlaxoSmithKline to avoid the complexities.

Bass: Still in HYP1, in twice-renamed form. Specifically, it was renamed as Six Continents in 2001, for reasons to do with the beer trademark 'Bass', then Six Continents was renamed Intercontinental Hotels when Mitchells & Butlers was demerged out of it in 2003 (this increased the number of HYP1 constituents from 15 to 16). The two holdings were fairly similarly-sized originally, with the IHG holding about 1.5 times the size of the MAB holding soon after the demerger, but IHG has greatly outperformed MAB since.

Britannic: Merged in Resolution in 2005, which was taken over for cash In February 2008 - see under Scottish & Newcastle below for what pyad did with the takeover proceeds.

Associated British Ports: Taken over for cash in August 2006. The replacement pyad chose was BT.

Boots: Merged to form Alliance Boots in 2007, then taken over for cash in June 2007. The replacement pyad chose was DSG International, which had previously been named Dixons and subsequently renamed itself as Dixons Retail. Dixons Retail then merged with Carphone Warehouse to form Dixons Carphone in 2014, and as indicated in the OP, Dixons Carphone renamed itself Currys a couple of months ago.

Gallaher: Taken over for cash in April 2007. The replacement pyad chose was British American Tobacco.

Scottish & Newcastle: Taken over for cash in April 2008. Pyad combined the proceeds of this takeover and the Britannic/Resolution takeover a couple of months earlier, and split them 50:50 between two replacement shares, namely Pearson and Persimmon.

Allliance & Leicester: Taken over for shares in Banco Santander in October 2008, but pyad chose to sell the holding before the takeover completed and reinvest the proceeds in topping up other holdings. His reasons were presumably some combination of not wanting to track a foreign company for HYP1, the small size of the holding (it had fallen to very roughly 1/3rd of its original £5k size), and wanting / not objecting to HYP1's size reducing back to the original 15 holdings.

Royal & Sun: Renamed to RSA Insurance at some point, with no change to its RSA symbol. Otherwise nothing happened until it was taken over for cash this year, with pyad choosing M&G as its replacement as described in the OP.

Gengulphus

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Re: HYP1 is 21

#459425

Postby Arborbridge » November 19th, 2021, 8:45 pm

MrFoolish wrote:
Arborbridge wrote:HYP1 is 21. Pyad has proved that this particular experiment has worked, and worked surprisngly well. Who would have predicted - apart from Pyad - that a relatively naive investor could set up a portfolio, just let it run - apart from the occasional attention due to market trading and dividend accumulation - and come out smiling.


Well, it is one particular portfolio started at one particular time. And not really a sensible one to have stuck with, given the inceasing lack of diversity. So I wouldn't get too carried away.

But yes, in general a basket of shares will outperform cash. I don't think this is any great secret.


Funny old world. I'm sure in the beginning, people would have said "It'll never work! What, never changing anything except for market trading? Ridiculous!" Actually, there were comments from sceptics of that sort at the time.

Yeah, then he only goes and does it. So the reaction isn't: "Well I never, it works!" but... "I don't think this is any great secret"

You just can't win, can you :lol:
We often see people criticised for hindsight: now we have a real time demonstration portfolio and people are still too cynical to admit that he had something interesting to offer.

I agree it is one particular portfolio, and all portfolios would evolve differently - however, what's the chances of picking a particular time and portfolio that did this so well? I doubt it is special, and although one cannot prove the general from the particular, I feel HYP1 is a fairly general particular 8-) :?

And as for whether it was "sensible" to stick with that one or not, people, you included miss the point. It was a demonstration, an experiment. It would hardly have been "sensible" to set up an experiment to prove a point and then alter it after a year or two. Indeed, people just like you would be pointing the finger saying Pyad had changed his tune.

Arb.

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Re: HYP1 is 21

#459434

Postby Bouleversee » November 19th, 2021, 10:12 pm

Gengulphus wrote:
Bouleversee wrote:
moorfield wrote:It's easy to forget how much HYP1 has changed over the years actually. I can't remember all the corporate actions that have happened but looking back on the November 2000 scriptures, 9 of the original 15 selections have since changed.

Gallaher (LSE: GLH) Tobacco
Scottish & Newcastle (LSE: SCTN) Brewery
Royal & Sun(LSE: RSA) Insurance
Alliance & Leicester (LSE: AL.) Bank
Britannic (LSE: BRT) Insurance
Bass (LSE: BASS) Hotels
Boots (LSE: BOOT) Retail
Associated British Ports (LSE: ABP) Ports
Blue Circle (LSE: BCI) Cement

Could I just ask how these changes came about and how the replacements were arrived at? If they were all takeovers, I think at least Boots was a cash one, wasn't it, so did Pyad choose this replacement and others? Might have worked out rather differently if Doris had had to manage, which is perhaps what 1invest was driving at. Nobody responded to that post; hard to know where to start,

In the order in which the first corporate action affecting the original holding happened:

Blue Circle Industries: Taken over for cash in July 2001. The replacement pyad chose was Hilton Group; it was renamed to Ladbrokes in 2006, then merged with a substantial part of Coral to form Ladbrokes Coral in 2016. Ladbrokes Coral was then taken over by GVC in 2018, for a mixture of GVC shares, cash and 'Contingent Value Rights' - the last being a debt-like security with very messy and complex terms. Pyad decided to sell the Ladbrokes Coral holding and replace it with one of GlaxoSmithKline to avoid the complexities.

Bass: Still in HYP1, in twice-renamed form. Specifically, it was renamed as Six Continents in 2001, for reasons to do with the beer trademark 'Bass', then Six Continents was renamed Intercontinental Hotels when Mitchells & Butlers was demerged out of it in 2003 (this increased the number of HYP1 constituents from 15 to 16). The two holdings were fairly similarly-sized originally, with the IHG holding about 1.5 times the size of the MAB holding soon after the demerger, but IHG has greatly outperformed MAB since.

Britannic: Merged in Resolution in 2005, which was taken over for cash In February 2008 - see under Scottish & Newcastle below for what pyad did with the takeover proceeds.

Associated British Ports: Taken over for cash in August 2006. The replacement pyad chose was BT.

Boots: Merged to form Alliance Boots in 2007, then taken over for cash in June 2007. The replacement pyad chose was DSG International, which had previously been named Dixons and subsequently renamed itself as Dixons Retail. Dixons Retail then merged with Carphone Warehouse to form Dixons Carphone in 2014, and as indicated in the OP, Dixons Carphone renamed itself Currys a couple of months ago.

Gallaher: Taken over for cash in April 2007. The replacement pyad chose was British American Tobacco.

Scottish & Newcastle: Taken over for cash in April 2008. Pyad combined the proceeds of this takeover and the Britannic/Resolution takeover a couple of months earlier, and split them 50:50 between two replacement shares, namely Pearson and Persimmon.

Allliance & Leicester: Taken over for shares in Banco Santander in October 2008, but pyad chose to sell the holding before the takeover completed and reinvest the proceeds in topping up other holdings. His reasons were presumably some combination of not wanting to track a foreign company for HYP1, the small size of the holding (it had fallen to very roughly 1/3rd of its original £5k size), and wanting / not objecting to HYP1's size reducing back to the original 15 holdings.

Royal & Sun: Renamed to RSA Insurance at some point, with no change to its RSA symbol. Otherwise nothing happened until it was taken over for cash this year, with pyad choosing M&G as its replacement as described in the OP.

Gengulphus


Very many thanks, Geng., for going to so much trouble. You are amazing to produce all that in such short order. My late husband and I had not even heard of Hyp 21 years ago but coincidentally seem to have picked up quite a number of the same shares. Records have been kept but not reasons for purchase or sale so all that was very interesting, especially to see that, although overall he did very well, Pyad did make some of the same mistakes as we did or is it really that we had the same bad luck? He did well not to take up the Santander offer; I see I also had A&L and am still stuck with a very unprofitable Santander. Am debating whether just to cut my losses. Can anyone see them recovering? (All my bank shares have been a disaster). I have no idea whether we had S & N but I have what is now a pretty large holding in Persimmon and my husband had Pearson, which has not done nearly so well and were sold after his death to fulfil his bequests. Further study tomorrow when I am less tired.

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Re: HYP1 is 21

#459448

Postby moorfield » November 19th, 2021, 11:50 pm

Arborbridge wrote: No one expected HYP1 to be the best thing since sliced bread: but it has proved a valuable point - that it works. It produces an income stream which rises with time and that one can keep one's capital increasing too.


So if it works, why then do most people here continue to tinker, and not just leave their portfolios be and accept the imbalances that may come and go?

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Re: HYP1 is 21

#459464

Postby idpickering » November 20th, 2021, 6:34 am

moorfield wrote:
So if it works, why then do most people here continue to tinker, and not just leave their portfolios be and accept the imbalances that may come and go?


Well said. OK, I have form for maybe meddling with my HYP to much in the past, but going forward it's something I'm trying to rectify. Ideally, I'd rather just let my HYP be, aside of my regular monthly top ups that is.

Ian.

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Re: HYP1 is 21

#459473

Postby Arborbridge » November 20th, 2021, 8:16 am

moorfield wrote:
Arborbridge wrote: No one expected HYP1 to be the best thing since sliced bread: but it has proved a valuable point - that it works. It produces an income stream which rises with time and that one can keep one's capital increasing too.


So if it works, why then do most people here continue to tinker, and not just leave their portfolios be and accept the imbalances that may come and go?


You are suggesting that if people tinker, it is because HYP doesn't work? That isn't logically sound. HYP can still work - indeed, I would argue the published figures prove it - but the human animal is hardwired to try to improve and invent. It is part of the human condition that we take something then try to build a better "something". We simply cannot leave alone.

Whether all that tinkering and changing achieves very much of an improvement is open to discussion. I've never bothered to check my HYP against HYP1 but I believe my performance could be much worse, and even TJHs results are not outclassing HYP1 - if I understand a chart here which I saw earlier.

There are a few more comments I made on the subject of the Zen of HYP investing on a parallel thread, which may be relevant to your question:
viewtopic.php?f=15&t=29014

Arb,

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Re: HYP1 is 21

#459478

Postby MrFoolish » November 20th, 2021, 8:53 am

Arborbridge wrote:Funny old world. I'm sure in the beginning, people would have said "It'll never work! What, never changing anything except for market trading? Ridiculous!" Actually, there were comments from sceptics of that sort at the time. Arb.


I suspect you are making strawman points.

Some will have a preferred that diversity is maintained with a TJH type approach. Indeed, this is rarely, if ever, criticised. TJH's strategy is a complete one, unlike pyad's where its limitations get swept under the carpet. I will take my hat off to TJH for not ducking the difficulties.

Others will prefer to see an international element to the constituents, perhaps adding an IT.

And others will prefer a different strategy altogether, but we won't discuss them here. Even those that follow HYP on this board tend to have "other portfolios" that like The Dark Lord must not be named.

Anyway, if anyone actually said you cannot run a non-trading portfolio then perhaps you could link to an example or two?

Had I commented myself at the time I would have said you'd be pushing your luck with it. And I'd say the same today. I definitely would not advise it to a novice investor as a one-stop approach... would you?

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Re: HYP1 is 21

#459508

Postby Lootman » November 20th, 2021, 10:34 am

MrFoolish wrote: others will prefer a different strategy altogether, but we won't discuss them here. Even those that follow HYP on this board tend to have "other portfolios" that like The Dark Lord must not be named.

Anyway, if anyone actually said you cannot run a non-trading portfolio then perhaps you could link to an example or two?

Had I commented myself at the time I would have said you'd be pushing your luck with it. And I'd say the same today. I definitely would not advise it to a novice investor as a one-stop approach... would you?

To my knowledge one thing that HYP says nothing about is what percentage of one's net worth one should allocate to it. I do not believe that it prescribes putting everything in a strategy that involves just 15 UK shares, never adjusting them and playing the lottery. The lottery worked out in this case due to some lucky timing with over-weighting commodities, but what if the commodity cycle had turned the other way?

HYP1 was also lucky in that it started about the time of the dotcom crash, when value shares started to out-perform, following several years of them under-performing - a period which HYP1 avoided due to pure chance.

So there is a fair degree of risk in HYP1, which takes a few forms. First there is no safety cushion in the first few years if markets had turned down. Secondly HYP1 involved some fairly big bets on a small number of sectors, which worked out but easily might not have done. There is also single country risk such as we might have seen if Corbyn had become PM. And then over time the highly skewed nature of the holdings.

It is for these reasons that investors have come up with safety cushions of cash to ride out the significant number of years when HYP1 income fell. Pyad went in 100% into a rising market, which flatters the result. But where was the margin of safety?

It is also for these reasons that investors have HYP as just one of several strategies i.e. the ones we can't mention here.

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Re: HYP1 is 21

#459509

Postby 88V8 » November 20th, 2021, 10:36 am

MrFoolish wrote:Others will prefer to see an international element to the constituents, perhaps adding an IT.

Had I commented myself at the time I would have said you'd be pushing your luck with it. And I'd say the same today. I definitely would not advise it to a novice investor as a one-stop approach... would you?


Many holders use tax shelters which do not permit foreign shares.

And HYP1 was a demo, an extreme demo, and given that HYP was/is an annuity substitute it has worked in spades on the capital front.
And after all, it doesn't have to work forever. What's the average period of survival after retirement...

Of course the dividend environment was more benign 21 years ago. Would it work now? Not so well, I think.
But then, all strategies are a product of their time.

V8

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Re: HYP1 is 21

#459511

Postby MrFoolish » November 20th, 2021, 10:40 am

1nvest wrote:Bogle recommends the ultimate in buy-and-hold investing: a completely static portfolio. He would buy the 50 largest companies in the S&P 500 and then never buy another. The portfolio would ignore the constant small adjustments that Standard & Poor's makes in the index.


The 50 largest companies in the S&P is a very different beast to the typical HYP though.

Lots of established tech (e.g. Microsoft, Apple), Amazon, Berkshire Hathaway (mostly non-tech), Home Dept, J&J, Coca-Cola, McDonalds, to name a few.

https://www.slickcharts.com/sp500

I remember reading recently that the market cap of Apple was bigger than the entire FTSE 100.

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Re: HYP1 is 21

#459518

Postby MrFoolish » November 20th, 2021, 10:52 am

88V8 wrote:Many holders use tax shelters which do not permit foreign shares.


As far as I know, you can hold foreign shares in both SIPPs and ISAs, but you might have withholding tax complications. And you can hold them indirectly via funds too.

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Re: HYP1 is 21

#459529

Postby monabri » November 20th, 2021, 11:10 am

For completeness, does anyone have a record of the capital values from "early days" (see table of blanks in grey)?

Image

edit: I'm interested in the manner in which the XIRR values increased timewise.

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Re: HYP1 is 21

#459549

Postby moorfield » November 20th, 2021, 11:31 am

Arborbridge wrote:You are suggesting that if people tinker, it is because HYP doesn't work? That isn't logically sound. HYP can still work - indeed, I would argue the published figures prove it - but the human animal is hardwired to try to improve and invent. It is part of the human condition that we take something then try to build a better "something". We simply cannot leave alone.




I'm suggesting it is because they think HYP doesn't work or doesn't suit them, for whatever reason (but they then misappropriate the acronym anyway). I don't disagree with your paragraph there, but the instructions on the tin were clear were they not.

Do not be tempted to meddle, and try not to let press comment on your companies influence you.


To "press comment" above, I would also add "internet forum comment".

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Re: HYP1 is 21

#459555

Postby Arborbridge » November 20th, 2021, 11:38 am

MrFoolish wrote:
Arborbridge wrote:Funny old world. I'm sure in the beginning, people would have said "It'll never work! What, never changing anything except for market trading? Ridiculous!" Actually, there were comments from sceptics of that sort at the time. Arb.


I suspect you are making strawman points.

Some will have a preferred that diversity is maintained with a TJH type approach. Indeed, this is rarely, if ever, criticised. TJH's strategy is a complete one, unlike pyad's where its limitations get swept under the carpet. I will take my hat off to TJH for not ducking the difficulties.

Others will prefer to see an international element to the constituents, perhaps adding an IT.

And others will prefer a different strategy altogether, but we won't discuss them here. Even those that follow HYP on this board tend to have "other portfolios" that like The Dark Lord must not be named.

Anyway, if anyone actually said you cannot run a non-trading portfolio then perhaps you could link to an example or two?

Had I commented myself at the time I would have said you'd be pushing your luck with it. And I'd say the same today. I definitely would not advise it to a novice investor as a one-stop approach... would you?


I'm not clear where the strawman argument comes in, and the rest is hardly relevant to my comment, though valid.

As to taking up the challenge of searching for quotes amongst thousands of posts from twenty years ago: I'll leave that to you if you are sufficiently motivated :lol: It was an opinion based on the various naysayers I read at the time and over the years, and you can hardly deny there have been plenty.

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Re: HYP1 is 21

#459557

Postby Arborbridge » November 20th, 2021, 11:41 am

moorfield wrote:
Arborbridge wrote:You are suggesting that if people tinker, it is because HYP doesn't work? That isn't logically sound. HYP can still work - indeed, I would argue the published figures prove it - but the human animal is hardwired to try to improve and invent. It is part of the human condition that we take something then try to build a better "something". We simply cannot leave alone.




I'm suggesting it is because they think HYP doesn't work or doesn't suit them, for whatever reason (but they then misappropriate the acronym anyway). I don't disagree with your paragraph there, but the instructions on the tin were clear were they not.

Do not be tempted to meddle, and try not to let press comment on your companies influence you.


To "press comment" above, I would also add "internet forum comment".


The instructions on the tin were clear enough, but people generally have a habit of ignoring or misreading them :)

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Re: HYP1 is 21

#459570

Postby Gengulphus » November 20th, 2021, 12:02 pm

monabri wrote:For completeness, does anyone have a record of the capital values from "early days" (see table of blanks in grey)?

For years 1-7, viewtopic.php?f=15&t=26261&p=357460#p357460 provides links to (among other things) pyad's end-of -year reviews. For year 8, pyad never produced an end-of-year review, at least that I'm aware of (and if he did, it wasn't on TMF).

The same link also contains my reconstruction of the end-of-year-8 HYP1 - if I got it right, its capital value was £77,155.67. That reconstruction also provides end-of-year-9 share counts for HYP1, which could be combined with end-of-year-9 historical share prices to get an end-of-year-9 capital value.

Pyad's end-of-year-9 review was decidedly skimpy and had no details of capital values, but historical share prices for most of HYP1's shares can be obtained from kool4kats' review of what was later called CHYP1, a couple of posts down in that thread.

Pyad's end-of-year-10 review provides the end-of-year-10 capital value.

Gengulphus

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Re: HYP1 is 21

#459601

Postby monabri » November 20th, 2021, 1:24 pm

Table updated.

Image

(2002 - negative return in terms of XIRR)
(2008 - value calculated by Gengulphus)
(2011 - XIRR spot check value agrees with previous calculation in 2011 by Arb - https://web.archive.org/web/20161112153 ... sort=whole )

The XIRR returns seem to have stabilised at ~8% to 9% level over the last few years. I was surprised by how well things were in 2006/7 (when the FTSE was loved?), falling away in the following two years before recovering to a roughly contant return which hasn't changed that much in the last decade when the US market seems to have been the place to be. What will happen in the next 10 years?....Hopefully we will all be around to find out.

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Re: HYP1 is 21

#459607

Postby 1nvest » November 20th, 2021, 2:04 pm

MrFoolish wrote:The 50 largest companies in the S&P is a very different beast to the typical HYP though.

From a set of 15 you need one to total return (dividends reinvested) 14.5% annualised real, or two to 10.6% real, or three to 8.4% real, or four to 6.8% real ... over 20 years, in which case all of the others could go broke and you'd break-even in real terms. Those are pretty good odds of being achieved on the growth side even if you threw darts to select the candidate stocks, whilst all of the remainder going broke is a remote probability. Above average yield as a selection criteria is picking riskier stocks, distressed situations where the stock could collapse, could recover/rebound (above average upside potential). The probabilities of say 4 out of 15 achieving 6.8% annualised real are pretty good odds IMO.


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