Remove ads

Introducing the LemonFools Personal Finance Calculators

Basket of Seven - Current yields and discounts

General discussions about equity high-yield income strategies
Itsallaguess
Lemon Quarter
Posts: 3216
Joined: November 4th, 2016, 1:16 pm
Has thanked: 973 times
Been thanked: 1947 times

Basket of Seven - Current yields and discounts

#176554

Postby Itsallaguess » October 27th, 2018, 12:16 pm

I thought that given the recent general market drops, it might be interesting to see how Luni's Basket of Seven investment trusts are currently sitting, so here's some information from Trustnet this morning -


CP = Cumulative Performance (%)

Link to Luni's last Basket of Seven review - https://www.lemonfool.co.uk/viewtopic.php?t=12192

Some of the income-oriented investment trusts are becoming interesting at current prices, but I think I might wait to see if some improved discounts appear before dipping my toe.

In this type of market, I very much prefer to deploy capital into income-related investment trusts, especially if they are showing good discounts.

Historically, I find it difficult to purchase single-company high-yielders during these types of markets, and prefer to give myself the additional diversification that most wider-ranging trusts can offer.

When I've done this in the past and prices have generally continued to travel southwards, as they often do during these periods, I find that I can handle that type of market much better if I know that my income-portfolio is not concentrated around a relatively small number of specific shares.

Cheers,

Itsallaguess

Dod101
Lemon Quarter
Posts: 2751
Joined: October 10th, 2017, 11:33 am
Has thanked: 487 times
Been thanked: 991 times

Re: Basket of Seven - Current yields and discounts

#176563

Postby Dod101 » October 27th, 2018, 1:17 pm

Interesting numbers thanks, even if you have a Basket of Six and not Seven. The missing one seems to be Perpetual Income.

Dod

Itsallaguess
Lemon Quarter
Posts: 3216
Joined: November 4th, 2016, 1:16 pm
Has thanked: 973 times
Been thanked: 1947 times

Re: Basket of Seven - Current yields and discounts

#176565

Postby Itsallaguess » October 27th, 2018, 1:29 pm

Dod101 wrote:
Interesting numbers thanks, even if you have a Basket of Six and not Seven. The missing one seems to be Perpetual Income.


Ah - thanks Dod, well spotted - I'm sure it was there at one point, but I must have lost it during the formatting of my post.

Here's the updated table containing all of the Basket of Seven components -


CP = Cumulative Performance (%)

Cheers,

Itsallaguess

monabri
Lemon Quarter
Posts: 2492
Joined: January 7th, 2017, 9:56 am
Has thanked: 241 times
Been thanked: 585 times

Re: Basket of Seven - Current yields and discounts

#176569

Postby monabri » October 27th, 2018, 2:08 pm

Just wondering, why was Merchants (MRCH) not included as an income IT when B7 was first proposed? Was there some reason to discount it?

Dod101
Lemon Quarter
Posts: 2751
Joined: October 10th, 2017, 11:33 am
Has thanked: 487 times
Been thanked: 991 times

Re: Basket of Seven - Current yields and discounts

#176581

Postby Dod101 » October 27th, 2018, 3:31 pm

monabri wrote:Just wondering, why was Merchants (MRCH) not included as an income IT when B7 was first proposed? Was there some reason to discount it?


I guess you would need to ask Luni but he has included what he called the 'metrics' in his post which can be accessed via the link provided. When the basket was set up Merchants had some very expensive debt and possibly as a result, the overall performance was not good, even if the income was acceptable. They refinanced some of the debt in 2017 much more cheaply and have as a result made the Trust more attractive.

Dod

monabri
Lemon Quarter
Posts: 2492
Joined: January 7th, 2017, 9:56 am
Has thanked: 241 times
Been thanked: 585 times

Re: Basket of Seven - Current yields and discounts

#176600

Postby monabri » October 27th, 2018, 5:12 pm

Dod101 wrote:
I guess you would need to ask Luni but he has included what he called the 'metrics' in his post which can be accessed via the link provided. When the basket was set up Merchants had some very expensive debt and possibly as a result, the overall performance was not good, even if the income was acceptable. They refinanced some of the debt in 2017 much more cheaply and have as a result made the Trust more attractive.

Dod



Thanks. Looking at the debt levels for Merchants, it all seems 'under control'.

My info from 'SimplyWallStreet' (a paid for service ..... or sign up with email for 10 free searches per month) we have:-

- Merchants Trust's level of debt (17.8%) compared to net worth is satisfactory (less than 40%).
- The level of debt compared to net worth has been reduced over the past 5 years (20.3% vs 17.8% today).
- Debt is well covered by operating cash flow (38.2%, greater than 20% of total debt).
- Interest payments on debt are well covered by earnings (EBIT is 8.8x coverage).

Dividend cover is reported as x2.2

MRCH is currently at a 2.2% discount to NAV and has a yield of 5.4%.

the top 10 holdings are (quite a lot would be 'HYP' replication as one might expect)


Royal Dutch Shell Plc B Shares EUR0.07 7.82%

BP Plc Ordinary US$0.25 5.78%

GlaxoSmithKline plc Ordinary 25p 5.77%

HSBC Holdings plc Ordinary USD0.50 4.89%

Lloyds Banking Group plc Ordinary 10p 3.95%

Standard Life Aberdeen Plc Ordinary 3.49%

UBM PLC 3.45%

BHP Billiton plc Ordinary US$0.50 3.36%

SSE plc Ord 50p 3.11%

Prudential plc Ordinary 5p 3.02%

richfool
Lemon Slice
Posts: 999
Joined: November 19th, 2016, 2:02 pm
Has thanked: 182 times
Been thanked: 186 times

Re: Basket of Seven - Current yields and discounts

#176641

Postby richfool » October 27th, 2018, 8:27 pm

There are some previous discussions about the cost of the borrowings at Merchants trust. I understand the first debenture mentioned was repaid in Jan this year (2018). Though there is another still continuing until 2023:
Another fund that has suffered from having expensive long-term debt in my view is, Merchants (MRCH), the £528 million UK equity income trust managed by Simon Gergel at Allianz Global Investors.

In 1987 Merchants borrowed money in an unnecessarily complicated deal whereby it paid 7.16% interest in the first year, rising by 7.5% a year until the rate hit 14.75% in 1998 and trundled on at that level until the debt expires next January. I can’t conceive why Merchants’ directors ever thought that was a good idea.

Rising markets and the added firepower from the debenture have boosted Merchants’ long-term returns but it has been a volatile ride. The 2009 annual report highlighted gearing of 36% as the credit crunch approached its nadir.

Fortunately, Merchants was able to hold its nerve and ride out the storm. However, many investors have shied away, put off not only by the debt that is about to mature but also by a separate 30-year, 9.251% debenture maturing in 2023 (yes, amazingly the board compounded its problem in 1993) and another chunk of 5.875% debt extending to 2029.

https://citywire.co.uk/investment-trust ... der+Weekly

viewtopic.php?f=54&t=7092&p=77161&hilit=Merchants#p77161

viewtopic.php?f=54&t=7661&p=84947&hilit=Merchants#p84947

Eboli
Lemon Pip
Posts: 72
Joined: November 7th, 2016, 9:05 pm
Been thanked: 14 times

Re: Basket of Seven - Current yields and discounts

#177557

Postby Eboli » November 1st, 2018, 10:42 am

MRCH (Merchants) is in the basket of eight (Bo8).

When a few months back Luni commented on the basket of seven (Bo7) he did mention that FCI might not be included if he were employing the same principles to-day with the benefit of hindsight. If that be the case what would be included may be the more important question to consider than the historical data of a basket that wouldn't (or may not) now be employed de novo.

Rather like the original Pyad hyp1, the data on Bo7 may be interesting in the same way as a work or art. It does not answer the question as to what would be chosen for a Bo7 (or BoX or hypX for that matter) to-day. Even Luni recognised this implying at one stage in the early reports on Bo7/8 a suggestion that SCAM should be a constituent (though he later specifically rejected it.)

Eb.

runnygum
Lemon Pip
Posts: 52
Joined: November 4th, 2016, 9:35 pm
Has thanked: 10 times
Been thanked: 20 times

Re: Basket of Seven - Current yields and discounts

#178707

Postby runnygum » November 7th, 2018, 9:25 am

FCI is one of the best for cap gains over the last 3 years of the 7 in any case.

Eboli
Lemon Pip
Posts: 72
Joined: November 7th, 2016, 9:05 pm
Been thanked: 14 times

Re: Basket of Seven - Current yields and discounts

#180006

Postby Eboli » November 13th, 2018, 3:16 pm

runny gum said:

FCI is one of the best for cap gains over the last 3 years of the 7 in any case


Wrong. It's in the middle. Using latest price as posted by me compared with close on 16th November 2015 we have:

BNKR 826 630 = 31.11%
MYI 1068.76 848.5 = 25.95%
JCH 702 600 = 17.0%
BCI* 263.50 304 = 15.37%
MRC 194.24 175.6 = 10.61%
LWI 1365.3 1324.5 = 3.08%
PLI 332 416.5 = -20.2%

*FCI renamed epic to-day BCI

Eb,

Eboli
Lemon Pip
Posts: 72
Joined: November 7th, 2016, 9:05 pm
Been thanked: 14 times

Re: Basket of Seven - Current yields and discounts

#180416

Postby Eboli » November 15th, 2018, 6:47 am

gagdge said:
Take a look at IVI.


That further strays into Luni's basket of 8 ('Bo8') where IVI's yield is only average but recent performance not so encouraging. It may be worthwhile doing the 3 year comparison to the Bo7 previously posted. Though the Bo8 was always intended not to be growth orientated but to provide a high and perhaps sustainable yield (the current Bo8 would yield 4.56% to-day - compared with the 3.69% that the Bo7 would so yield).

Using the same 16th November 2015 close the comparison is (yield first; latest close; 16/11/15 price; "capital" growth of share price):

Temple Bar TMPL 3.55% £12.22 £10.93 +13.8%
Merchants MRCH 5.33% £4.795 £4.35 +10.2%
Murray Income MUT 4.58% £7.28 £6.84 +06.43%
Schroder Income GrowthSCF 4.34% £2.72 £2.595 +04.81%
Dunedin Income Growth DIG 5.46% £2.405 £231 +04.11%
City of London CTY 4.5% £3.98 £3.865 +02.97%
Edinburgh EDIN 4.35% £6.40 £7.71 -07.0%
Invest Income Growth IVI 4.38% £2.63 £2.8375 -08.94%

I suppose this re-emphasises the point I originally made, namely that 'snapshot' progress of Luni's Bo7 and Bo8, Pyad's Hyp1 or whatever portfolio that is prescribed as one you do not tinker with is of interest only as so many tables. If the precepts, however, are good what would matter is what would be included in such a portfolio to-day. For example, I would serious question whether the Bo8 should hold DIG.

The do not tinker with requirement IMHO really makes these 'snapshots' of value in an aesthetic rather than practical sense.

Eb.

Eb.

runnygum
Lemon Pip
Posts: 52
Joined: November 4th, 2016, 9:35 pm
Has thanked: 10 times
Been thanked: 20 times

Re: Basket of Seven - Current yields and discounts

#181486

Postby runnygum » November 19th, 2018, 9:44 pm

Eboli wrote:runny gum said:

FCI is one of the best for cap gains over the last 3 years of the 7 in any case


Wrong. It's in the middle. Using latest price as posted by me compared with close on 16th November 2015 we have:

Eb,


Err, "one of" ...for me buying mid 2015 its sitting at number 2 as of today.

I bought all 7 at the same time. BNKR sitting at number 1. BCI/FCI is number 2.
Depends on the baseline :)

Spet0789
Lemon Slice
Posts: 722
Joined: June 21st, 2017, 12:02 am
Been thanked: 42 times

Re: Basket of Seven - Current yields and discounts

#181504

Postby Spet0789 » November 19th, 2018, 10:58 pm

Just an observation... today MRCH trades at a small premium to NAV for the first time in years.

Any ideas why?

I hold.

Eboli
Lemon Pip
Posts: 72
Joined: November 7th, 2016, 9:05 pm
Been thanked: 14 times

Re: Basket of Seven - Current yields and discounts

#181566

Postby Eboli » November 20th, 2018, 9:21 am

runnygum said:

Depends on the baseline :)


Agreed :) and I am sorry if I seemed pedantic. However, it is the reason why I find these snapshots aesthetic viewing.

To be fair to Hyp1 - the results of which have been recently (14th November) published by pyad on the HYP Practical board - it may be fairer to Luni as creator of the Bo7 to measure from the date when the portfolio was conceived (Nov 2010). When Luni published his review on 14th June this year on the IT and UT board his 'capital metrics' were stated as:

Capital metrics: share price change in decade to latest financial year end, number of years behind the index, average yield and discount/premium:

BNKR: +94.1%, 3, 2.9%, 8.3%
FCI: +31.9%, 6, 3.9%, -1.7%
JCH: +40.1%, 6, 3.9%, 7.9%
LWI: +37.9%, 4, 3.4%, 4.6%
MRC: +110.8%, 4, 3.3%, 13.4%
MYI: +91.5%, 3, 4.1%, -2.1%
PLI: +54.6%, 3, 3.7%, 5.1%
-----------------------------------
B7: +70.7%, 3, 3.5%, 6.3%


On his view FCI was
the runt of the litter


on capital as well as income growth. He intimated that he would select another candidate because FCI - now BCI - was a
misidentified pick
.

Because of the no tinker tag that Bo7 holds in common with Hyp1 - Luni expresses it as
The B7 is an eternity-buy-and-hold job


- we are back to aesthetic observation.

Though I doubt that there will be a proliferation of 'no tinker' portfolios suggested and followed, it is important to recognise that the longer these 'exhibitions' occur the more likely the works exhibited will at least include an exhibit whose viewing is dependent entirely on luck of the selection being made at the right time. And saying this is not intended to be an animadversion.

Eb.

Arborbridge
Lemon Quarter
Posts: 2852
Joined: November 4th, 2016, 9:33 am
Has thanked: 499 times
Been thanked: 847 times

Re: Basket of Seven - Current yields and discounts

#182509

Postby Arborbridge » November 23rd, 2018, 12:00 pm

MRCH was not included in the basket of seven because it did not comply with what Luni wanted. The BO7 was constructed with a slightly lower yield but higher dividend growth rate. The BO8 was for those of us who wanted a higher immediate income but content with a lower dividend growth rate.

That's as I remember it, anyway.

I've recently topped up Henderson Far East Income, PLI and the JMP Euro income trust, JETI.

I also notice IVI is ripe for a topup, though I'm not sure where the cash will be diverted from at present. MYI is another possible, out of favour at present, but offering a good yield.

Arb.

88V8
Lemon Slice
Posts: 406
Joined: November 4th, 2016, 11:22 am
Has thanked: 45 times
Been thanked: 50 times

Re: Basket of Seven - Current yields and discounts

#182621

Postby 88V8 » November 23rd, 2018, 7:43 pm

I bought MRCH some time ago.
When I mentioned this, Luni's comment was 'Merchants' overpays.'
So I guess they didn't tick his boxes, back then.

V8

DiamondEcho
Lemon Quarter
Posts: 2815
Joined: November 4th, 2016, 3:39 pm
Has thanked: 2065 times
Been thanked: 413 times

Re: Basket of Seven - Current yields and discounts

#186967

Postby DiamondEcho » December 15th, 2018, 1:49 am

I hadn't heard of Lowland before, until mentioned in the DT Questor column on Wednesday:
'Lowland, managed by another veteran investor, James Henderson of Janus Henderson, has generated an even better total return of 331.3pc over 10 years in share price terms. Strikingly, dividend growth over five years has been 7.9pc a year but the total return – not the annualised figure, remember – has been just 7.8pc over the same period. Neither is that recent record of dividend growth a fluke: over the past 25 years the growth in the payout has averaged 7.6pc a year. The trust yields 4.2pc for the current year and trades at a discount of 5.7pc.'
https://www.telegraph.co.uk/investing/f ... -dividend/

DiamondEcho
Lemon Quarter
Posts: 2815
Joined: November 4th, 2016, 3:39 pm
Has thanked: 2065 times
Been thanked: 413 times

Re: Basket of Seven - Current yields and discounts

#186968

Postby DiamondEcho » December 15th, 2018, 2:14 am

I can't edit prev, so for own poss future ref: re: Lowland - https://www.trustnet.com/factsheets/t/h ... nt-company

Dod101
Lemon Quarter
Posts: 2751
Joined: October 10th, 2017, 11:33 am
Has thanked: 487 times
Been thanked: 991 times

Re: Basket of Seven - Current yields and discounts

#186978

Postby Dod101 » December 15th, 2018, 7:29 am

88V8 wrote:I bought MRCH some time ago.
When I mentioned this, Luni's comment was 'Merchants' overpays.'
So I guess they didn't tick his boxes, back then.


As has been mentioned before Merchants has improved its profile a bit with the retirement of some very expensive debentures, thus relieving some pressure on its Revenue Account.

I have not looked at its accounts for a while though.

Dod

monabri
Lemon Quarter
Posts: 2492
Joined: January 7th, 2017, 9:56 am
Has thanked: 241 times
Been thanked: 585 times

Re: Basket of Seven - Current yields and discounts

#187008

Postby monabri » December 15th, 2018, 10:21 am

Merchants' record of 36 years of rising income...well, if they have been overpaying, they're managing to keep all the balls in the air for a long time.

https://www.sharesmagazine.co.uk/news/s ... -milestone

Current yield of 5.6%


Return to “High Yield Shares & Strategies - general”

Who is online

Users browsing this forum: No registered users and 2 guests