HYP1 change

[pyad]

Ladbrokes Coral has received an agreed bid from GVC Holdings on rather complex terms which I can't be [expletive deleted] to follow through in the portfolio. So despite the generally non-tinker nature of HYP1 I have, unusually, today sold LCL in the market. For the reinvestment I've decided to switch the sector from gambling to drugs with a new share, GlaxoSmithKline.

The sale of 2,624 LCL realised £4,789 which after all sale and purchase costs, which I always bring in for realism in this notional portfolio, acquired 352 GSK.

GSK has a much higher yield than LCL so will boost portfolio income assuming its 80p dividend is maintained and also this is an opportune point for the trades in order to catch the likely 23p Q4 final dividend from GSK which goes ex on 22 Feb.

[Dod101]

Switching from gambling to drugs, especially to Glaxo, means in my book that you are still gambling.

Dod

[Gengulphus]

Switching from gambling to drugs, especially to Glaxo, means in my book that you are still gambling.

Just in case this comment confuses anyone: a company's sector is supposed to describe what the company does, not what investors in it are doing!

Gengulphus

[moorfield]

Given that HYP1’s income is already “crushing inflation” (last report) it seems unnecessary, but I understand the sentiment.

Just out of interest, since I neither hold or have been following this, what would be the outcome of the “do nothing option” corporate action?

Am also looking at a switch into GSK, replacing my AZN. There’s a small time window to do that between their ex-dividend dates next month.

[idpickering]

Given that HYP1’s income is already “crushing inflation” (last report) it seems unnecessary, but I understand the sentiment.

Just out of interest, since I neither hold or have been following this, what would be the outcome of the “do nothing option” corporate action?

Am also looking at a switch into GSK, replacing my AZN. There’s a small time window to do that between their ex-dividend dates next month.

Why not hold both AstraZeneca and GlaxoSmithKline? I do that myself for whatever that's worth.

Ian.

[Dod101]

Given that HYP1’s income is already “crushing inflation” (last report) it seems unnecessary, but I understand the sentiment.

Just out of interest, since I neither hold or have been following this, what would be the outcome of the “do nothing option” corporate action?

Am also looking at a switch into GSK, replacing my AZN. There’s a small time window to do that between their ex-dividend dates next month.

Remember Carillion? Do not chase yield. If you currently hold only Astra, I would just leave it there but it is up to you of course.

Dod

[Arborbridge]

Switching from gambling to drugs, especially to Glaxo, means in my book that you are still gambling.

Dod


Remember Carillion? Do not chase yield. If you currently hold only Astra, I would just leave it there but it is up to you of course.

Dod

You're being a bit cryptic today, Dod Why is Glaxo's yield of 5.9% gambling any more than your are with nearly that much on LGEN or 7% on SSE or other shares you hold? If yield incidates risk, then they are all gambling, and you are just as guilty of chasing yield as anyone - unles you say you will sell those shares forthwith and settle for less.
And BTW, HYP is a philosophy which actively chases yield anyway! It seems this morning, you are attempting to trash Pyad's decision making and indeed his basic idea.

Arb.

[Dod101]

Not really Arb. I just think that Glaxo's dividend is at more risk than the others. Thus pyad is gambling in buying Glaxo and I think Monabri would be ill advised to switch out of Astra to Glaxo. Maybe buy Glaxo but keep Astra as well. I rationalise the high yields on the usual suspects by the fact that these shares have been out of favour for some time. In particular we have dealt with SSE and the risks peculiar to it.

I do not see HYP as 'chasing yield'. We buy shares with a yield higher than the market average but the philosophy does not require us to seek the highest yield surely.

My comment in reply to pyad's post was intended to be slightly punny.

As you know I hold all those mentioned.

Dod

[Gengulphus]

Just out of interest, since I neither hold or have been following this, what would be the outcome of the “do nothing option” corporate action?

Not completely determined - it produces a mixture of GVC shares, cash and 'Contingent Value Rights'. The last convert into loan notes after the government review of fixed-odds betting terminals completes, with the amount the loan notes are worth depending on what changes are made as a result to some of the rules about those terminals. They then pay interest until they mature and pay out the amount they're worth, either 18 months after the deal goes through or 6 months after their amount is determined (whichever is later).

There is also a dependency on shareholder choices - shareholders can use a 'mix & match' facility to try to get more cash and fewer GVC shares, or vice versa, but will only succeed to the extent that they can be matched to shareholders making the opposite choice. But that would of course not be the outcome for shareholders who do nothing!

For more detail, see my description in viewtopic.php?f=15&t=9172 when the deal was announced just before Christmas. I haven't seen anything more announced since.

Gengulphus

[bluedonkey]

Not really Arb. I just think that Glaxo's dividend is at more risk than the others. Thus pyad is gambling in buying Glaxo and I think Monabri would be ill advised to switch out of Astra to Glaxo. Maybe buy Glaxo but keep Astra as well. I rationalise the high yields on the usual suspects by the fact that these shares have been out of favour for some time. In particular we have dealt with SSE and the risks peculiar to it.

I do not see HYP as 'chasing yield'. We buy shares with a yield higher than the market average but the philosophy does not require us to seek the highest yield surely.

My comment in reply to pyad's post was intended to be slightly punny.

As you know I hold all those mentioned.

Dod

Dod,

Why is Legal & General's high yield not a risk warning? Just curious as I have a lot of skin in that particular game.

[Dod101]

Dod,

Why is Legal & General's high yield not a risk warning? Just curious as I have a lot of skin in that particular game.

According to my records L & G are yielding something like 5.3% and as I said in a response to Arb earlier defensive shares seem to have been left behind in the current situation so although 5.3% may seem high it is not really near any danger zone I think. I am no expert though but I have known L & G for a very long time and have held it for more than 20 years and it has a very good record. You can ask the same question of Imperial and several others I think.

We can all find something to worry about with any share. Personally I grade my shares according to desirability and on any threat to the dividend at least Glaxo and SSE are more vulnerable I think. I too have a significant holding in them but that should be no comfort to you and we will know in the next couple of months or so when the results season comes in.

Dod

[Arborbridge]

Not really Arb. I just think that Glaxo's dividend is at more risk than the others. Thus pyad is gambling in buying Glaxo and I think Monabri would be ill advised to switch out of Astra to Glaxo. Maybe buy Glaxo but keep Astra as well. I rationalise the high yields on the usual suspects by the fact that these shares have been out of favour for some time. In particular we have dealt with SSE and the risks peculiar to it.

I do not see HYP as 'chasing yield'. We buy shares with a yield higher than the market average but the philosophy does not require us to seek the highest yield surely.

My comment in reply to pyad's post was intended to be slightly punny.

As you know I hold all those mentioned.

Dod

Well, we're back to value judgements again. On the one hand, you criticise people buying shares at a high yield risky, and that yield as a warning they would be well advised to heed. On the other hand, high yields you already own are not warnings at all - basically because you say so! In other words, the yield isn't the important thing, but some other factors which you occasionally fill in.

As for HYP not chasing yield in the sense you use it - in my view you are wrong. The basic HYP method we learnt at Pyad's knee is to rank shares in order of yield, highest topmost and choose them by going down that list. That is accepting that higher yields are preferable, and indeed requires you to select a short list from the highest yields. That's wwhat HYP does! Whether you define that as "chasing" yield is semantics, but it's certainly buying the highest yield - subject, naturally to the specified safety factors.
Incidentally, I would say you mean "choosing the highest yields" not chasing them - which in my view would apply only when a share is continously falling in price. Referring to buying a high yield as chasing yield isn't, or may not be, the same.

Arb.

[moorfield]

Why not hold both AstraZeneca and GlaxoSmithKline? I do that myself for whatever that's worth.

That's due to a limitation (currently) of my self-imposed portfolio management rules, max. 20 holdings - O/T here.

Remember Carillion? Do not chase yield. If you currently hold only Astra, I would just leave it there but it is up to you of course.

Indeed but GSK is no Carillion, in market cap terms. The yield gap between the two, 4.2% vs. 5.9%, is sufficiently attractive currently for me to consider replacing.

Not completely determined - it produces a mixture of GVC shares, cash and 'Contingent Value Rights'.

Thanks Gengulphus. I wasn't being deliberately waspish towards pyad btw, but it seems he's thrown a curved ball with the tinker decision. Is it a subjective one I wonder - "can't be [expletive deleted]" suggests it might be - or is there any objective thinking behind it we can appropriate here in future.

[Arborbridge]

Thanks Gengulphus. I wasn't being deliberately waspish towards pyad btw, but it seems he's thrown a curved ball with the tinker decision. Is it a subjective one I wonder - "can't be [expletive deleted]" suggests it might be - or is there any objective thinking behind it we can appropriate here in future.

I think "can't be [expletive deleted]" is a perfectly acceptable Dorisian guideline. In a way, it sums up the whole idea.

Arb.

[Davidsb]

I am very much with Pyad on this one - I have not come across GVC on any of my HYP sweeps, so I assume that some combination of its past and forecast yields would prevent it from being selected for my HYP on its merits - therefore I have no desire to inherit a holding as part of the LCL deal.

As LCL's share price has drifted up since the bid was announced, so the current/forecast yield has drifted down, so I (a conviction non-tinkerer) am tempted to sell LCL and combine the sale proceeds with my current cash to buy two shares as replacements.

[moorfield]

I think "can't be [expletive deleted]" is a perfectly acceptable Dorisian guideline. In a way, it sums up the whole idea.

My thoughts also, so why tinker in the first place?

[Arborbridge]

Because riding it out until the deal is concluded is more hassle than it's worth - and probably won't offer much more in value. Best to get out at a good price and move on.

I wish I'd done the same with Vodafone with their Verizon carry on.

There's a lot to be said for that. It does make life easier, and if like me you keep - admittedly non-Dorisian - records, it would help. One thing I hate almost more than anything (aparts from disasters!) are the various obnoxious corporate issues which keep arising and disturning the peace.

Arb.

[Dod101]

Arb

I suspect you are being argumentative for the sake of it. I did not learn about HYPing from pyad and even if I had it would not bind me to believe every word he says nor mean I had any need to conform to his rules.

5.3% is not that far above the market average but then where do you draw the line? The Glaxo yield if it is indeed 5.9% is getting into 'iffy' territory and we know that they are just about managing to maintain their dividend because they have said so. L & G has never said anything like that, reassure the market that is, because I guess they do not feel the need. I frankly do not care if you or anyone else thinks I am wrong; that is your prerogative, but I am more often right than wrong which is all that matters to me.

You will note under the Carillion Post Mortem thread that I did indeed warn about Carillion on 31 January 2017.

I keep saying; I am no expert and am certainly not claiming to be. We all need to be continuously on our guard, I know that as well as anyone. So I think enough said.

Dod

[Arborbridge]

Arb

I suspect you are being argumentative for the sake of it. I did not learn about HYPing from pyad and even if I had it would not bind me to believe every word he says nor mean I had any need to conform to his rules.

5.3% is not that far above the market average but then where do you draw the line? The Glaxo yield if it is indeed 5.9% is getting into 'iffy' territory and we know that they are just about managing to maintain their dividend because they have said so. L & G has never said anything like that, reassure the market that is, because I guess they do not feel the need. I frankly do not care if you or anyone else thinks I am wrong; that is your prerogative, but I am more often right than wrong which is all that matters to me.

You will note under the Carillion Post Mortem thread that I did indeed warn about Carillion on 31 January 2017.

I keep saying; I am no expert and am certainly not claiming to be. We all need to be continuously on our guard, I know that as well as anyone. So I think enough said.

Dod

What me? argumentative?
I know you didn't learn about HYPing from Pyad, which is why you made that mistake. I sorry to tell you that HYP is about reaching for the highest yield at a given time having regard to the safety criteria. When you said that it wasn't, in point of fact you were incorrect. End of.

My other point about the yield is also puzzling some others, I think. You say some yields are clearly risky, while other similar yields are not. This seems inconsistent - but what you mean mean is that a yield which comes from an unsustainable dividend is risky, wheres one which is from a sustainable dividend is not. So, you've appeared arbitrary by saying the problem is the yield, when that isn't the whole story you meant to convey.

It all comes down to judgement, and your judgement does often seem to be correct - something to be applauded.

As regards Carillion, you did write in 2017, but my post was pointing out a more general thing. Many of us had owned CLLN far longer (seven years, in my case), and I can remember no public outcry about what a terrible company it was at the time it was being proposed. These comments nearly always arrive after the horse has bolted. I admit your 2017 post would have saved some pain, but there was hardly an avalanche of comment - on the contrary, some investors like TJH were still buying not long before, and urging calm. In these situations, some people will be right, others not - mostly it's a bit of judgement added to a bit of luck. I cannot help feeling that people are inclined to say "I told you so" when they did nothing of the sort.

Finally, I hope we can lay to rest our discussion about diworsification. It isn't the number of stocks which is the problem, but the ability of the stock picker. Monks IT, I was reading today has 100 stocks on its books, yet has out shone or equalled small portfolios like Finsbury with 26. For a poor stock picker - such as the average John Doe and myself - erring on the large side is probably an advantage. I'd still rather have RDSB supplying 4% of my income than 8% - it just feels less vulnerable. In 2010, I had some insight into that when BP's dividend was slashed - and that only account for 3-4% of my income at the time.

Arb.

[Wizard]

What me? argumentative?
I know you didn't learn about HYPing from Pyad, which is why you made that mistake. I sorry to tell you that HYP is about reaching for the highest yield at a given time having regard to the safety criteria. When you said that it wasn't, in point of fact you were incorrect. End of...

Arb

I think you have previously said that you do not believe there is such a thing as 'TLF HYP', so I will not use that term. But we are on a TLF Board called High Yield Portfolios (HYP) - Practical and the guidance for this board "defines" HYP in that context. It says:

...For the HYP Practical board we define an HYP as a portfolio comprised exclusively of ordinary shares. If selected, such shares should have a dividend yield above the average for the FTSE100 index and be drawn from the constituents of the FTSE 350 index. At its simplest, it will have at least 15 holdings, none of which should be from the same sector. A long term buy and hold (LTBH) of these shares is envisaged.

Investment Trusts or open ended funds should not be included, although REITs are acceptable.

Selection criteria may include the yield, the dividend record and a history of increases. Debt level and free cash flow should be considered. Personal feelings can affect the choice, including ethical considerations. Additional criteria may be used by individuals...

My bold.

Can't see anything there that says that an HYP (as defined on TLF) has to select shares with the highest yield available at any point in time. Just that it should be above FTSE100 average.

The world has moved on from PYAD's original articles, but I suspect you do not accept that.

Terry.