Problems with where to post (WAS SLA discussion)

[PrefInvestor]

Moderator Message:
Thread moved here from HYP Practical and erstwhile biscuit bar

Well daveh, as a newcomer to these boards I have to say that it seems like you need a PhD in Lemon Fool even to be able to post on the right board. Compared with that investing is surely a simple task !.

Anyway you have clearly done well with your HYP strategy. If I’ve understood your unitisation numbers correctly (also new balls for me) then it sounds like you’ve at least tripled your capital since 2003. At a rough calculation that’s a 7% average gain per year which is more than acceptable.

Especially when you consider the things that you’ve invested in many of which have seen extremely troubled times (assuming that you’ve held them for most of that time ?). Scanning your list all of the following BT, LLOY, PRU, SSE, UU, VOD, PSN, CLLN (!), TSCO, LLPC and PFC have all seen MAJOR setbacks over the years. Just maybe that’s a tribute to the strategy in that you have been able to accumulate both capital and income over the years despite all those headwinds. TBH there are so many disasters there that I am honestly surprised that that the impact on your portfolio performance has not been more significant. But congratulations on your outstanding performance anyway.

Personally I see the frequent major setbacks in single stocks as a major reason to avoid these investments. I have only 6 in my portfolio now BP, RDSB, AV, LGEN, GSK and HSBA all of which I hope I can trust to not suffer the excessive falls that other stocks seem prone to. Or at least if they do then it’s probably worth buying some more of them. About 1/3rd of my portfolio is in what I hope are stocks with relatively stable SPs paying high dividends (preference shares and renewables). The rest is in high yield investment trusts or ETFs to minimise single stock effects and keep ongoing costs to a minimum. My portfolio can be found here if you are interested.

https://www.lemonfool.co.uk/viewtopic.php?t=16156#p20052t4

That said having the majority of my investments in equities is new to me as prior to March 2018 I was >80% invested in a range of preference shares. I started those investments in around 2011 and over the years that followed I reckon I almost doubled my money. But my comeuppance came In March 2018 with the preference share crash caused by the redemption threat. That caused a significant loss (and the threat of far worse) so I decided to sell everything and move to an equity income strategy, no small decision at that time. But with interest rates rising it seemed the best course of action. 2018 wasn’t great either but hoping for better things this year.

With my pref investments my annual target was about an 8-10% capital gain pa. With my new portfolio its too early to tell really. But I am not afraid to sell to protect my capital when there is a market downturn. In fact I did exactly that towards the end of 2018 which spared me significant losses at that time. I believe in capital preservation and will take that route over income generation whenever I think that circumstances call for it.

Wishing you ATB with your investments.

Pref

[Alaric]

Well daveh, as a newcomer to these boards I have to say that it seems like you need a PhD in Lemon Fool even to be able to post on the right board.

It's only really the TLA HYP that you have to be wary of.

Long, long ago, words of wisdom were written on the TMF site describing HYP. Those following this strategy can have a near religious fervour and object strongly in some cases to those who are agnostic or atheist to its premises.

If there was a compromise agreed, it was that the zealots would be confined to the HYP - Practical board. Unfortunately that doesn't prevent newcomers with an interest in high income strategies posting on the HYP board to the displeasure of the purists.

In my mind it's an extremely valid point that high levels of dividend can be misleading if the Company is just returning shareholder capital, rather than profits. The original outlines rather fudged or ignored the issue.

[csearle]

Hi PrefInvestor,

Well daveh, as a newcomer to these boards I have to say that it seems like you need a PhD in Lemon Fool even to be able to post on the right board. Compared with that investing is surely a simple task !.

Sure you've already read this from our Gengulphus which, for the benefit of those that haven't, seeks to explain (quite well in my opinion) about the scope of these boards.

Regards,
Chris

[StepOne]

Long, long ago, words of wisdom were written on the TMF site describing HYP. Those following this strategy can have a near religious fervour and object strongly in some cases to those who are agnostic or atheist to its premises.

If there was a compromise agreed, it was that the zealots would be confined to the HYP - Practical board.

I'm not sure language like that really helps, Alaric.

StepOne

[Alaric]

I'm not sure language like that really helps

You don't need to look very far to see adherents of "HYP" treating criticism of it as an attack on their faith.

[StepOne]

I'm not sure language like that really helps

You don't need to look very far to see adherents of "HYP" treating criticism of it as an attack on their faith.

All I'm saying is that it should be possible to discuss these matters without turning it personal.

StepOne

[tjh290633]

I'm not sure language like that really helps

You don't need to look very far to see adherents of "HYP" treating criticism of it as an attack on their faith.

All I'm saying is that it should be possible to discuss these matters without turning it personal.

StepOne

Watch out or a Fatwa may be issued.

Seriously, though, if you stick to the guidelines and avoid trying to stir up apathy, you may be OK.

TJH

[PinkDalek]

Daveh's response to earlier posts is also now on this board:

viewtopic.php?f=31&t=16454

Probably not worth the Mods attempting to merge the two.

[daveh]

Anyway you have clearly done well with your HYP strategy. If I’ve understood your unitisation numbers correctly (also new balls for me) then it sounds like you’ve at least tripled your capital since 2003. At a rough calculation that’s a 7% average gain per year which is more than acceptable.

I actually started the portfolio in earnest in 2000 and had a holding in Aviva (Norwich Union at the time) purchased in 1997 on demutualisation. It sort of started as a PYAD26 mechanical portfolio, but when PYAD posted about the HYP portfolio on the Motley fool I thought that was more suited to my temperament so it morphed into a HYP. I only started unitising from 2003 as that was where I had sufficient data back to, for me to be able to do the unitisation. I have sufficient data (the cashflows) to do an XIRR calculation right back to the start and that comes out at an annual return of 7.08% to 31Dec18. Its improved a little with the gains at the beginning of the year and is now 7.42% pa to today.

Note that the accumulation units have tripled and that includes reinvested dividends so capital has tripled on a total return basis. If dividends were removed capital would only be up 1.48x.

Its possible I could have done better with a different strategy, but I've enjoyed the investing and it suits my temperament. I like seeing the income I'm receiving build up year on year bar the odd blip and I like the idea of being able to draw an income just by taking the dividends when I need to.

I've been a very hands off investor once a share has been purchased - I've not sold. Some shares it would have been good if I'd sold eg CLLN, but others that have cut their dividend and performed poorly have come good (eventually), some turning out to be my best performing shares. I'll have a look at my spreadsheet and see if I can put together a post on that later.

[micrographia]

Moderator Message:
Thread moved here from HYP Practical and erstwhile biscuit bar

Personally I see the frequent major setbacks in single stocks as a major reason to avoid these investments. I have only 6 in my portfolio now BP, RDSB, AV, LGEN, GSK and HSBA all of which I hope I can trust to not suffer the excessive falls that other stocks seem prone to. Or at least if they do then it’s probably worth buying some more of them.

Probably stating the obvious here but of the 6 shares you list, 2 (BP and AV) have had major dividend cuts in the last decade (twice in the case of AV). Two are the mercy of the oil price, another 2 are in essentially the same business (AV and LGEN) and if you add HSBA to them then half of your holdings are in financials, a sector with a demonstrated ability to blow up every so often. Minor points, but the GSK payout has been static for 5 years and half of these shares declare their dividend in dollars so are subject to exchange rate fluctuations. I think your trust is misplaced .

I'd imagine that these holdings will be replicated in your UK-focused ETFs while BP and RDSB will be a significant chunk of your commodities ITs as well. If you are as risk averse as you appear to be is it worth considering whether you are better off not investing directly in individual shares? Not a criticism by the way, I just don't understand why if you were going to hold shares directly you would do so in a way that concentrates so much risk.

Regards, EEM.

[PrefInvestor]

Hi micrographia, Well my 6 single stocks only amount to ~20% of my portfolio. Personally I'm not worried about BP or RDSB cutting their dividend or their future generally given that they are both moving into renewables and power generation. There is no duplicated exposure in my commodity holdings (CAML & CYN) but some in BRCI plus a limited amount in my UK ETFs (ZWUK & ZILK). I would estimate that my overall exposure to any of my 6 single stocks is no more than perhaps 5%. Of the six if I have concerns over any it is the potential for a dividend cut from GSK. I have far greater exposure to preference shares ~15% (spread across 6 different holdings) and renewables ~19% (again spread across 6 different holdings), but these I perceive to be relatively stable robust dividend payers. My overseas exposure I estimate at about 15%.

Thanks for the input anyway !.

Pref