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Hypster's HYP

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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Hypster
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Hypster's HYP

#44575

Postby Hypster » April 8th, 2017, 10:43 am



This is the first time posting my portfolio. I was adding new holdings with each tranche of new money and when I got to 17 I started to allow top-ups. The holdings >6% value weighting are the ones that have received one top-up so far. I'm now looking to top-up two holdings per month, unless a new candidate appears on my radar screen* in which case I'll buy a new holding.

I'm following TJH's top up methodology: Vodafone is in pole position but I'm vetoing that for personal reasons, which means I'll be assessing suitability of National Grid and AstraZeneca for topping-up in early May.

*My selection criteria is posted in the Scraping The Barrel thread viewtopic.php?f=15&t=3533&p=34422#p34422

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Re: Hypster's HYP

#44584

Postby moorfield » April 8th, 2017, 11:21 am

Hypster wrote:I'm following TJH's top up methodology: Vodafone is in pole position but I'm vetoing that for personal reasons,


Hypster, I don't want to pry and I'm not going to ask, but may I offer these observations on that:

(i) you are following a well known and sound methodolgy yet appear to be overriding it with an emotional decision
(ii) you are vetoing a top up yet continue to hold which (to me) seems inconsistent if acting on personal reasons.

Otherwise your diversification looks sound. I would stop at 20 holdings but YMMV.

M

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Re: Hypster's HYP

#44593

Postby Arborbridge » April 8th, 2017, 12:00 pm

i) you are following a well known and sound methodolgy yet appear to be overriding it with an emotional decision
(ii) you are vetoing a top up yet continue to hold which (to me) seems inconsistent if acting on personal reasons.


Are you being a little unfair? How do you know the reason is "emotional" rather than rationally based? The top up idea is only a starting point, and I credit Hypster with having put some further thought into the process - until he says otherwise.
And actually, there's nothing wrong with adding a dose of "personal reasons" to one's choices.

As for your second point: this has often been discussed here, for many of us hold shares which would not be worthy of topping up, but nevertheless we continue to hold. The criteria for holding are rather different to those for selling or for topping up - that's why the apparent inconsistency arises.

I've sometimes noted that the great investors describe the factors they look for in a share, but quite often the choose some action which is inconsistent. They are adapt their methods rather than apply dogma, it seems.

Arb.

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Re: Hypster's HYP

#44613

Postby moorfield » April 8th, 2017, 3:16 pm

Arborbridge wrote:Are you being a little unfair? How do you know the reason is "emotional" rather than rationally based?


Harsh perhaps Arb, but I don't think unfair. It's offered not as a criticism but as an observation, and I was careful to state I didn't want to pry. I don't know if it's emotional or rational which is why I posted in the first place. I'm curious to test and learn from other people's thinking here (and equally happy to have my own thinking tested).

Arborbridge wrote:As for your second point: this has often been discussed here, for many of us hold shares which would not be worthy of topping up, but nevertheless we continue to hold.


You've missed my second point. That's understood in a financial context such a dividend cut or rights issue, but personal reasons implies a different context. If driven by a reason such as (I'm speculating) "they've consistently given me cr4p service" or "they've sacked my gran" - then why hold at all?

I'm not perfect either btw, I follow TJH's system but use it as a guide rather than an instruction, and have not always topped up the first choice!

M

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Re: Hypster's HYP

#44620

Postby Arborbridge » April 8th, 2017, 4:08 pm

I follow TJH's system but use it as a guide rather than an instruction, and have not always topped up the first choice!


Same here, and therefore you should understand that other factors sometimes come into play, which makes what sounded like a pointed criticism at little off-key.


Arb.

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Re: Hypster's HYP

#44634

Postby kempiejon » April 8th, 2017, 5:06 pm

Arborbridge wrote:
I follow TJH's system but use it as a guide rather than an instruction, and have not always topped up the first choice!


Same here, and therefore you should understand that other factors sometimes come into play, which makes what sounded like a pointed criticism at little off-key.


Arb.


Ah but if we're talking about tjh's top up system, as I understand it only looks at the value and yield of shares already held to produce a shortlist to increase portfolio yield and add to underweightings to level out balance. It doesn't look at fundamentals like cover, history of dividends, debt etc. things I like when adding money to the HYP. In my portfolio first choices using the HYPTUSS are often not the best HYP picks. For example Vodafone and Centrica are high up my list but VOD is iffy on cover and CNA is a cutter.

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Re: Hypster's HYP

#44663

Postby Arborbridge » April 8th, 2017, 7:23 pm

Ah but if we're talking about tjh's top up system,....


Quite right Kempiejon, as you point out, leaving the investor to make a decision based on other factors if he/she so wishes.
Theses could include "personal reasons" based on a variety of judgements either about the share, or the fact that you may have other shares outside the HYP in the same sector. If you're an Aviva owner, you might even want to hang in there to get your money back, but no way would you want to top up!

What you are saying is that the HYPTUSS is a blind mechanical instrument and we have the right to make our own decisions - and your are absolutely correct. It's what any of the well known investors would do, whether they have a "method" or not.
And I sometimes think it isn't always cool rationality, either, but based on value judgements: something more like Dod or Lootman who use "smell" as a decider.

Arb

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Re: Hypster's HYP

#44666

Postby Itsallaguess » April 8th, 2017, 7:38 pm

Arborbridge wrote:
What you are saying is that the HYPTUSS is a blind mechanical instrument and we have the right to make our own decisions

Arb


I'd take it even further than that Arb, and say the HYPTUSS is a blind mechanical instrument and we have a responsibility to make our own decisions...

I honestly cannot remember the last time I actually topped up a share that came 'top' of my HYP top-up list.

There's often (and certainly for the recent past) been a good enough reason for me to work my way down to candidates lower in the list, but I was glad of the knowledge that at least the list was ranked in order of 'importance' in terms of benefiting my HYP the most, the higher the candidates were in the list.

I don't think I've ever heard anyone at all suggest that a buy-decision should always be given to a share simply because it might 'come top of the list'.

Due diligence should always be carried out, in my opinion, well over and above the level of scrutiny given by the HYPTUSS ranking method itself.

Cheers,

Itsallaguess

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Re: Hypster's HYP

#44695

Postby tjh290633 » April 8th, 2017, 11:09 pm

Itsallaguess wrote:I'd take it even further than that Arb, and say the HYPTUSS is a blind mechanical instrument and we have a responsibility to make our own decisions...

I honestly cannot remember the last time I actually topped up a share that came 'top' of my HYP top-up list.

There's often (and certainly for the recent past) been a good enough reason for me to work my way down to candidates lower in the list, but I was glad of the knowledge that at least the list was ranked in order of 'importance' in terms of benefiting my HYP the most, the higher the candidates were in the list.

I don't think I've ever heard anyone at all suggest that a buy-decision should always be given to a share simply because it might 'come top of the list'.

Due diligence should always be carried out, in my opinion, well over and above the level of scrutiny given by the HYPTUSS ranking method itself.

Cheers,

Itsallaguess


There are all sorts of reasons why one might decide not to top up the top runner. It might be about to launch a rights issue, for example, in which case taking up the rights might be the better option. It might be about to take over another company, about which you have doubts and wish to see what the effects of the take-over are, since take overs often react poorly for the company doing the takeover.

There is that indefinable "smell" about a share, which may cause one to be sceptical about buying more of it. A new CEO, for example, and the probability of him "kitchen sinking" the accounts.

TJH

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Re: Hypster's HYP

#44696

Postby Gengulphus » April 8th, 2017, 11:14 pm

moorfield wrote:
Arborbridge wrote:As for your second point: this has often been discussed here, for many of us hold shares which would not be worthy of topping up, but nevertheless we continue to hold.

... but personal reasons implies a different context. If driven by a reason such as (I'm speculating) "they've consistently given me cr4p service" or "they've sacked my gran" - then why hold at all?

Not the only sort of context personal reasons could imply. For example, before I retired, I owned shares in my employer. If I wanted to trade them at all - buy or sell - I had to get permission, and it wasn't automatic. So I could be rejecting a top-up for personal reasons - and rejecting a sale for exactly the same personal reasons!

Gengulphus

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Re: Hypster's HYP

#44721

Postby Arborbridge » April 9th, 2017, 7:08 am

I'd take it even further than that Arb, and say the HYPTUSS is a blind mechanical instrument and we have a responsibility to make our own decisions...


Itsallaguess,

You are quite right to putting more strongly - I was pussy-footing a bit! Thanks for filling in the point in more detail.

And to Terry also for confirming that he does not follow slavishly but has various reasons for passing over a share.

In general, it seems quite respectable for having "personal reasons", in addition to purely numeral reasons, for rejecting a share :)

Arb.

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Re: Hypster's HYP

#44737

Postby Hypster » April 9th, 2017, 9:22 am

Thank you for all your replies, the subsequent debate about not slavishly following the top-up ranking was very interesting. I'd phrased it as "personal reasons" almost as a throwaway line to keep the post succinct! The truth is, my wife also holds Vodafone outside of the HYP and I was thinking that the family's total position was already high. If I were to combine the holdings, VOD would be at the bottom of the top-up ranking, would breach sector, value, and income limits. I choose not to combine her holding into the HYP in case she decides to sell at some point and I don't want her trading skewing the performance measurements of our LTBH HYP.

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Re: Hypster's HYP

#45496

Postby dejw » April 12th, 2017, 12:44 pm

I'm not an expert on HYP, so I won't comment on the previous posts.

There is, however, an interesting facet of human personality in mechanical investing, and in other fields too.

Human nature is inquisitive, and wants to explore and do better. Totally mechanical investment plans MAY do better than human driven ones, but they are not as much fun. That's why many posters here value adding "their personal touch/intelligence / experience / bias / prejudices / stupidity. Too many aircraft crashes have been caused by pilots overriding automatic systems because they "knew better". This of course avoids the question "how many crashes hve been avoided by overriding?".

It's interesting that in 1998 or so the Motley Fool was trumpeting its "Beat the Footsie" mechanical system. I think it died a death....we hear no more of it? Was it the "big idea" that failed, or its mechanical implementation.

Also...when ETFs started they were touted as low cost, no intelligence used method of tracking an index. You invested in the index, not the ETF. Now we have "intelligent ETFs", "managed ETFs" etc.....and the low cost aspect looks flaky too.

Other domains have tried a mechanical approach to problem solving ...and investment is problem solving "how to make money". To my knowledge mechanical apporaches (aka artificial intelligence" have been applied to medicin and project management.

DejW

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Re: Hypster's HYP

#45596

Postby tjh290633 » April 12th, 2017, 5:39 pm

dejw wrote:It's interesting that in 1998 or so the Motley Fool was trumpeting its "Beat the Footsie" mechanical system. I think it died a death....we hear no more of it? Was it the "big idea" that failed, or its mechanical implementation.

I found the BTF system somewhere else before I found TMF. I followed the fortunes of the FT30 index for a number of years and as I recall tried it when I set up a new ISA in 1999. That gave me:

TATE - Tate & Lyle plc
RSA - Royal & Sun Alliance Ins Gp plc
ALLD - Allied-Domecq plc
BAY - British Airways plc
BCI - Blue Circle Industries plc

and it soon gave problems because ALLD divested itself of its pubs, gave back some cash and shares in BASS and was taken over not after. RSA got rid of its life business and fell a lot, and BAY stopped paying dividends in 2002.

I have two more calculations which show from 2003 the following:

BA. BAE Systems
EMI
ICI
RTR Reuters
PO P&O

and from 2008 (I think):

LOG Logica
BT.A
ITV
RSA
RBS

I can't recall what the TMF BTF portfolio held, and whether they followed the original method, but I have a feeling that they modified it. Whatever the reason, it fell by the wayside. The dot-com boom and bust may not have helped.

TJH

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Re: Hypster's HYP

#45636

Postby Gengulphus » April 12th, 2017, 9:25 pm

tjh290633 wrote:I can't recall what the TMF BTF portfolio held, and whether they followed the original method, but I have a feeling that they modified it. Whatever the reason, it fell by the wayside. The dot-com boom and bust may not have helped.

For those interested in investigating such questions, the TMF "Mechanical Investing" board might help. A link for mentions of "BTF" on that board is http://search.fool.co.uk/search/solr.aspx?datasource=board&mbmid=13277253&q=BTF&sort=date&source=isesitlnk0000006.

While looking to see what was available on that subject, by the way, I chanced on http://boards.fool.co.uk/qualiport-50062.aspx. I don't know whether anyone else will find the combination of the subject of the last multi-post thread there and the post dates as amusing as I do, but it seems worth drawing to people's attention!

Gengulphus

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Re: Hypster's HYP

#45642

Postby Instep » April 12th, 2017, 10:00 pm

Gengulphus wrote:
tjh290633 wrote:I can't recall what the TMF BTF portfolio held, and whether they followed the original method, but I have a feeling that they modified it. Whatever the reason, it fell by the wayside. The dot-com boom and bust may not have helped.

For those interested in investigating such questions, the TMF "Mechanical Investing" board might help. A link for mentions of "BTF" on that board is http://search.fool.co.uk/search/solr.aspx?datasource=board&mbmid=13277253&q=BTF&sort=date&source=isesitlnk0000006.

While looking to see what was available on that subject, by the way, I chanced on http://boards.fool.co.uk/qualiport-50062.aspx. I don't know whether anyone else will find the combination of the subject of the last multi-post thread there and the post dates as amusing as I do, but it seems worth drawing to people's attention!

Gengulphus


Now Archived Here. https://web.archive.org/web/20170412205 ... 50062.aspx

Also reminds me how annoyed I was when McCarthy and Stone were taken over.

Instep

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Re: Hypster's HYP

#45649

Postby tjh290633 » April 12th, 2017, 10:32 pm

This thread will lead to the history of the BTF:

https://web.archive.org/web/20170412212 ... sort=whole

This archived page is where PYAD tells the history and fate of the BTF:

https://web.archive.org/web/20170412213 ... anicalhome

TJH

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Re: Hypster's HYP

#45650

Postby tjh290633 » April 12th, 2017, 10:40 pm

By the way, the FT30 index still exists and its value is published daily in the "World markets at a glance" page in the FT. It can be accessed from https://markets.ft.com/data/archive as a PDF file of the whole page. The FT30 is somewhere in the middle, and the last five days' values are given.

TJH

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Re: Hypster's HYP

#45679

Postby pyad » April 13th, 2017, 8:14 am

tjh290633 wrote:This thread will lead to the history of the BTF:

https://web.archive.org/web/20170412212 ... sort=whole

This archived page is where PYAD tells the history and fate of the BTF:

https://web.archive.org/web/20170412213 ... anicalhome

TJH


The most flawed and illogical aspect of TMF's Beating the Footsie mech scheme was the use of HY selections from the FT30 in an attempt to beat the FTSE100. That never made any sense to me because these indices are so different. It should have used HY shares from the FT30 to try and beat the FT30 which would have been the correct UK equivalent of what O'Higgins did in the US with Beating the Dow. Or alternatively use HY selections from the FTSE100 to try and beat the FTSE100. But not mix the two as the Fool did.

Unfortunately when I took over its monitoring, it had already been set up by the people running Fool UK at the time. So I was stuck with this serious flaw. Quite apart from that failing in what it was attempting to beat, the fact remains that in absolute terms BTF results were disastrous with a large loss after five years, as my final article on the subject shows. Not just on that day either, it had been lousy for a long time.

One further point which some people confuse because of the high yield aspect. The BTF and similar schemes were not income strategies like HYPs. Rather, they used high yield only as a selection criterion, meaning they were really a crude mech value strategy. The aim was never to deliver income HYP style, it was always, like value investing, to try and generate capital gains over time. So the BTF is not a valid comparison with an income strategy like HYPs.

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Re: Hypster's HYP

#46488

Postby moorfield » April 17th, 2017, 8:11 pm

Hypster wrote:I'd phrased it as "personal reasons" almost as a throwaway line to keep the post succinct! The truth is, my wife also holds Vodafone outside of the HYP and I was thinking that the family's total position was already high.


Hypster I was away but thanks for clarifying last week! I hope you saw through the hyperbole in my comments. I've long since given up trying to partition Mr+Mrs stuff outside of my HYP and now apply my own diversifcation rules to everything across my SIPP, ISA, VCT pots - I am going to be living off the whole lot in retirement.


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