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Selling

General discussions about equity high-yield income strategies
ZipserSir
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Selling

#117108

Postby ZipserSir » February 10th, 2018, 1:07 pm

Hello, I'm really grateful to Pyad for HYP - the principle is great - but I'm not Doris and don't sit on my hands. I buy shares for their yield and their other HYP qualities. So, if something I am holding's share price is going to go bust, like Carillion, I will sell out. And, if something does better than I expected, I am willing to sell.

In November, I was fortunate enough to buy Royal Mail Group (RMG). Since then the price has risen by more than 40%. This is great as a value play, but as a HYP it means that I could either wait for six and a half years to get the same return from dividends (and heaven knows what will happen to the share price in the meantime) or I could sell it now, crystallize the gain and reinvest it somewhere to get a better return elsewhere.

Selling looks like the right thing to do, to me, but how do others see it?

Dod101
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Re: Selling

#117120

Postby Dod101 » February 10th, 2018, 1:57 pm

I would sell but I do not hold it. It must be a candidate for renationalisation if ever Labour were to become the government.

Dod

Wizard
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Re: Selling

#117123

Postby Wizard » February 10th, 2018, 2:04 pm

ZipserSir wrote:Hello, I'm really grateful to Pyad for HYP - the principle is great - but I'm not Doris and don't sit on my hands. I buy shares for their yield and their other HYP qualities. So, if something I am holding's share price is going to go bust, like Carillion, I will sell out. And, if something does better than I expected, I am willing to sell.

In November, I was fortunate enough to buy Royal Mail Group (RMG). Since then the price has risen by more than 40%. This is great as a value play, but as a HYP it means that I could either wait for six and a half years to get the same return from dividends (and heaven knows what will happen to the share price in the meantime) or I could sell it now, crystallize the gain and reinvest it somewhere to get a better return elsewhere.

Selling looks like the right thing to do, to me, but how do others see it?

If you could just tell me where the guaranteed better return is I will join you in selling my RMG ;)

Terry.

vrdiver
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Re: Selling

#117125

Postby vrdiver » February 10th, 2018, 2:11 pm

Looks like it was a good purchase.

Question: why did you buy it? Was it as part of a HYP portfolio? If so, and as a result of the current market situation, is it yielding less than your minimum vs the market? (as the market yield has gone up since November, whilst RMG's has gone down, this seems a fair question.)

If it was mine, and it met my disposal criteria, I'd record the sale in my HYP and replace with a new share that met my purchase criteria.

If I didn't have a purchase/disposal strategy, then selling because it looked like I was bagging a profit sounds more like trading than HYP; nothing wrong with trading, but certainly outside of my competence to comment on it!

From your post, it sounds like you might want to formalise your HYP selling criteria. e.g.:
Dividend has been cut
Dividend has been held (for x years?)
Share yield has fallen below x% of FTSE yield
Share yield has fallen below threshold
Share holding has risen above max threshold
Sector holding has risen above max threshold
etc etc

You might also want to set a frequency at which to test, e.g. every time price is updated, monthly, quarterly etc.

If you do manage your HYP more towards the "active" side of the spectrum, it is worth ensuring you include costs in your performance reporting (whether that's private analysis or shared doesn't matter, the principle is the same).
Where you're selling a share, it might be a useful thought experiment to copy it over as a "shadow holding" to compare against had you done nothing, but that will become quite complex as your sells mount up.

vrdiver
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Re: Selling

#117128

Postby vrdiver » February 10th, 2018, 2:13 pm

Dod101 wrote:I would sell but I do not hold it. It must be a candidate for renationalisation if ever Labour were to become the government.

Dod

I wonder how many staff still hold their shares from privatisation? I can see a bit of a stink kicking off if Labour were to privatise RMG without fair compensation!

Itsallaguess
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Re: Selling

#117134

Postby Itsallaguess » February 10th, 2018, 2:51 pm

ZipserSir wrote:
In November, I was fortunate enough to buy Royal Mail Group (RMG). Since then the price has risen by more than 40%.

This is great as a value play, but as a HYP it means that I could either wait for six and a half years to get the same return from dividends (and heaven knows what will happen to the share price in the meantime) or I could sell it now, crystallize the gain and reinvest it somewhere to get a better return elsewhere.

Selling looks like the right thing to do, to me, but how do others see it?


If you initially bought for income, then concentrating just on the share-price to help guide selling decisions will only ever show you half the story.

You need to keep an eye on the yield as well, to see how that reacts to any potential share price movement, especially over long periods, and then take that into account when you're looking at potential changes to your income portfolio.

For instance, I see that Digital Look show Royal Mail as having a Current Yield of 4.4%, and a Forecast Yield of 4.8% -

https://uk.webfg.com/equity/Royal_Mail

So, in the absence of there being any portfolio-diversification issue, where a large share-price rise might mean that your uncomfortable with a holding due to its capital allocation in relation to other holdings (you've not mentioned this as being an influence in this decision....), then the issue you'd have if you sold it would be just where you're going to put the proceeds that will deliver the same or better income-related returns...

That would mean that any potential home for the proceeds of this sale might need a better current yield than 4.4%, and a better prospective yield of 4.8%....

You might have such a home in mind, or you might currently not want to re-invest the proceeds from a sale back into the market, but you've not mentioned those aspects, and have purely discussed a potential sale based on the rise in the share price alone.

I should add that sometimes, income-related stocks will have a share-price that rises considerably over time in a way that isn't also reflected with a corresponding rise in dividend payments. This means that you may find situations where you might be looking at a considerable capital gain in an income-related share, that's also now yielding a great deal less than it was when it was first purchased.

In these situations, I've been known to rotate capital out of such investments and into better-yielding alternatives, at the same time as quite often sorting out some potential capital-diversification issues if the initial share-price gains has meant that the holding reaches levels that you're perhaps uncomfortable with compared to the rest of your portfolio.

But these specific situations are where a share might now be yielding perhaps 2%, or thereabouts, which brings me neatly back to my initial point, which was to say that by just concentrating on an income-investment's share-price rise, you're not fully considering the income-related situation, or what your alternatives might be should you choose to take action....

Cheers,

Itsallaguess

p.s I should also add that with the above post, I've consciously stayed away from the company itself that you're asking about, and tried to discuss more general income-investment-related considerations, but I feel that I should also add that I held RMG for a time during and after the privatisation period, but quickly sold as I don't particularly like the market that it's in, or a couple of other things related to the company, but that's my personal view and shouldn't at all influence your own thinking on the stock. I gave the privatisation gains to charity, as I didn't want to personally gain from the process.

monabri
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Re: Selling

#117149

Postby monabri » February 10th, 2018, 3:28 pm

Simple question - do you think the share price will decrease in the next 6 months? If so, the strategy would be to sell and then rebuy at the lower price - easy. Unfortunately, it's down to a guess.

A few months ago, the message for RMG owners would have been glum (potential strike ahead / Amazon will eat your lunch/ too expensive parcel post / pension problems). So, it shows how much sentiment can change in a very short time (example SSE, NG). I was surprised to see the sp increase to be honest.

if it were my choice - I'd sell and bank the severl years of divis and look to buy in again later, based on the fact I think the share price will reduce. But that's only my opinion.

Dod101
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Re: Selling

#117172

Postby Dod101 » February 10th, 2018, 5:08 pm

The reason I said I would sell now is partly the company itself and partly the current general market conditions. It is not so long ago that there was a worry about labour relations with RMG and the possibility of a strike and it is I suspect in an industry in long term decline.

And sitting on the sort of profit that the OP was mentioning in the current climate would certainly encourage me to sell, and buy something with what I think might be a better future such as Unilever at its current price and a reasonable if not good yield of around 3%.

Dod

Wizard
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Re: Selling

#117189

Postby Wizard » February 10th, 2018, 7:08 pm

Dod101 wrote:The reason I said I would sell now is partly the company itself and partly the current general market conditions. It is not so long ago that there was a worry about labour relations with RMG and the possibility of a strike and it is I suspect in an industry in long term decline.

And sitting on the sort of profit that the OP was mentioning in the current climate would certainly encourage me to sell, and buy something with what I think might be a better future such as Unilever at its current price and a reasonable if not good yield of around 3%.

Dod

Answer = Unilever

Now what was the question? :lol:

Terry.

pds2008
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Re: Selling

#117221

Postby pds2008 » February 10th, 2018, 10:22 pm

As far as I am concerned - just do whatever makes you sleep better tonight. Everything else is just bullshit.

gryffron
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Re: Selling

#117266

Postby gryffron » February 11th, 2018, 9:53 am

vrdiver wrote: I can see a bit of a stink kicking off if Labour were to privatise RMG without fair compensation!

Legislate to hold stamp prices way below (inevitably soaring) inflation. Wait for RMG to go bust. "Save" the company and the jobs by renationalising. Doddle.

Gryff

Wizard
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Re: Selling

#117278

Postby Wizard » February 11th, 2018, 10:33 am

Surely it is very easy. Come up with a policy to nationalise in whatever way you see fit and put that in your manifesto. If you are elected you have the mandate to nationalise. No need for any cunning plans.

Terry.

andyalan10
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Re: Selling

#117414

Postby andyalan10 » February 11th, 2018, 6:46 pm

Hi ZipserSir

You ask, on the High Yield Strategies (not HYP) board, what others think.

So I think weighting, diversification and the like are less important here than in the other place.

Generally I'd think +40% is not really enough to consider selling or reducing, but at the moment I suspect that there are a lot of shares off 20% plus in the same timeframe so I'd be very tempted to trade.

To give you an idea of how useful my advice might be I have recently added to BT, SSE and IMB, all yielding 6-8%. And on the law of averages I'm sure at least one of them will at some point in the future start to outperform the FTSE.

Andy

ZipserSir
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Re: Selling

#117472

Postby ZipserSir » February 11th, 2018, 9:02 pm

Thanks everyone, I really appreciate your giving your time to my question.

I am minded to sell RMG tomorrow.

Strangely enough I have Unilever in my sights. Yield is lower than average, but after so many high yield duds in the past year, high yield has become too eye-watering!

bluedonkey
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Re: Selling

#117673

Postby bluedonkey » February 12th, 2018, 5:00 pm

I acquired RMG when it listed at 330p. No plans to sell.


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