What PYAD has said about selling

[dspp]

At the request of G I am trying to split off a few items for the discussion he has asked for. Please disentangle the various responses carefully as I may have made errors.
regards,
dspp

*****************

Thanks Gen - I believe that was the article I remember. He makes it clear that he prefers eternity, but that "tinkering" is in some circumstance tolerated, though it smells a bit. That definitely requires us to trim or sell reluctantly and not too often, but if we do so in that spirit, we cannot be accused of being "non-HYPers".

Arb.

****************
Arborbridge wrote:
NeilW wrote:
HYP doesn't sell as a rule. It holds. If you're selling, you're not HYPing. You're doing a variation on value investing - which if you remember is where the PYAD acronym and looking for 'deep value' comes from.

HYP errs on the side of safety by avoiding the 'out' and chasing further value.

**************

Oh Dear. That sounds as though you conclude that TJH (and myself) are not HYPers.

I wonder if anyone can lay their hands on anything which would show that PYAD - even if reluctantly - agreed that selling a share were permissable? If not, then many of us are behaving badly

AFAIAA, he's never said it's not permissable - only recommended against it. But in any case, I can lay my hands on what you ask for:

https://web.archive.org/web/20071014125 ... ading.aspx

And much more recently:

viewtopic.php?f=15&t=9440 - note that this rather complex deal (described in viewtopic.php?f=15&t=9172) was not a pure cash takeover, so this was only a forced sale of part of the holding, the rest just morphing into something else as can happen e.g. in a merger.

There are others, but that should do to be getting on with.

Gengulphus

[BruceTanner]

I followed PYAD through the Dividend Newsletter years, and I recall there being a case where he recommended selling (mainly because I did!) Sorry I forget what the holding was but a takeover by a foreign company meant that future dividends would have been paid in a foreign currency. Not worth the hassle, tax complications and expense of dealing with this.

[PinkDalek]

If of any interest, the links in the split off OP are broken (the perils of C&Ping already truncated versions). They should be as follows:

HYPertrading By Stephen Bland | 29 March 2007
https://web.archive.org/web/20071014125924/http://www.fool.co.uk:80/news/investing/high-yield/2007/03/29/hypertrading.aspx

HYP1 change Post by pyad » 09 Jan 2018
https://www.lemonfool.co.uk/viewtopic.php?f=15&t=9440

(Mixed shares/cash/CVR offer for Ladbrokes Coral (LCL) Post by Gengulphus » 22 Dec 2017
https://www.lemonfool.co.uk/viewtopic.php?f=15&t=9172)

[Wizard]

My understanding was that there were some exceptional reasons to sell, as highlighted, but that the "no tinker" mantra meant selling just to rebalance was not part of purist PYADic HYP. The imbalance in HYP1 seems to confirm that PYADic HYP does not involve rebalancing for rebalancing's sake. If that is the case then selling is PYADic, but selling to rebalance is not.

[Dod101]

My understanding was that there were some exceptional reasons to sell, as highlighted, but that the "no tinker" mantra meant selling just to rebalance was not part of purist PYADic HYP. The imbalance in HYP1 seems to confirm that PYADic HYP does not involve rebalancing for rebalancing's sake. If that is the case then selling is PYADic, but selling to rebalance is not.

Very few would rebalance for rebalancing's sake, whatever that means. Rebalancing is to provide for a 'safer' and hopefully more secure source of dividends. HYP1 illustrates what happens or at least can happen if you do not rebalance periodically.

Dod

[vrdiver]

From the link:https://web.archive.org/web/20071014125924/http://www.fool.co.uk:80/news/investing/high-yield/2007/03/29/hypertrading.aspx

Despite my advice that eternity is the way to go, I have introduced two trading HYPs because I know that a number of readers want to see how that might work out. My HYPs 1 and 2 are eternity portfolios. 3 and 4 though are traders.

This being a yield-based strategy, I consider selling a share where its yield has fallen unacceptably low. There are two reasons why this could happen. Firstly a dividend cut unaccompanied by a proportionate share price fall and secondly a share price gain unaccompanied by a proportionate dividend rise. The former is far more likely to trigger a sale than the latter.

Pyad does reiterate his preference for eternity holdings, but from the article it is clear that trading to take advantage of price rises is perfectly acceptable. He doesn't exclude trading for other reasons (like an over-reliance on one share for dividends). He gives two instances of when he considers selling (which is different from stating there are only these two reasons) but then, he's not writing the gospel of HYP, just one article to explain what he's currently (as was) doing with HYP3 and HYP4, which he aptly names as Trading HYPs.

I'll repeat that last bit, as hopefully it won't be necessary to argue that HYP never sells, ever again: Trading HYP.

That doesn't conflict with his views on which approach is better.

I continue to maintain that eternity holding will produce the best long term returns for most HYPers.

It just means that HYP is a broad church

VRD

[Wizard]

My understanding was that there were some exceptional reasons to sell, as highlighted, but that the "no tinker" mantra meant selling just to rebalance was not part of purist PYADic HYP. The imbalance in HYP1 seems to confirm that PYADic HYP does not involve rebalancing for rebalancing's sake. If that is the case then selling is PYADic, but selling to rebalance is not.

Very few would rebalance for rebalancing's sake, whatever that means. Rebalancing is to provide for a 'safer' and hopefully more secure source of dividends. HYP1 illustrates what happens or at least can happen if you do not rebalance periodically.

Dod

To be clear, by "rebalancing for rebalancings sake" I mean rebalancing where bringing the portfolio back in to balance is the objective. So where one share has grown in value by much more than the others and represents a disproportionate share of the value of the portfolio or where the income from one share has grown by much more than the others in the protfolio and represents a disproportionate share of the income derived from the portfolio. Both of these things are for safety, so I think we agree.

[Wizard]

From the link:https://web.archive.org/web/20071014125924/http://www.fool.co.uk:80/news/investing/high-yield/2007/03/29/hypertrading.aspx

Despite my advice that eternity is the way to go, I have introduced two trading HYPs because I know that a number of readers want to see how that might work out. My HYPs 1 and 2 are eternity portfolios. 3 and 4 though are traders.

This being a yield-based strategy, I consider selling a share where its yield has fallen unacceptably low. There are two reasons why this could happen. Firstly a dividend cut unaccompanied by a proportionate share price fall and secondly a share price gain unaccompanied by a proportionate dividend rise. The former is far more likely to trigger a sale than the latter.

Pyad does reiterate his preference for eternity holdings, but from the article it is clear that trading to take advantage of price rises is perfectly acceptable. He doesn't exclude trading for other reasons (like an over-reliance on one share for dividends). He gives two instances of when he considers selling (which is different from stating there are only these two reasons) but then, he's not writing the gospel of HYP, just one article to explain what he's currently (as was) doing with HYP3 and HYP4, which he aptly names as Trading HYPs.

I'll repeat that last bit, as hopefully it won't be necessary to argue that HYP never sells, ever again: Trading HYP.

That doesn't conflict with his views on which approach is better.

I continue to maintain that eternity holding will produce the best long term returns for most HYPers.

It just means that HYP is a broad church

VRD

That is an interesting approach, presumably the words "trading" or "trader" will not be used as an insult on HYP Practical going forward

[Dod101]

Are any results of the Trading HYP available, does anyone know? I had never heard of such a thing before that but then I am not a disciple of pyad. I just do my own thing broadly in line with HYP - Practical, but that bit of news is very helpful so that even the most dedicated or purist HYPer can actually trade, not just rebalance, and still be within the master's guidelines. Interesting times.

Dod

[vrdiver]

...presumably the words "trading" or "trader" will not be used as an insult on HYP Practical going forward

So long as we can associate trading activity as supporting the High Yield strategy of HYP, I see no reason for any issue.

To be honest, I've never been that concerned when somebody yells "you... you... you dirty little TRADER you!!"

The arguments will alwasy be as to whether the trade was aligned with increasing income or purely about capital - either way, I shan't lose any sleep over whether a fellow HYPer has sold some or all of a holding, but I will be delighted that they have chosen to share that information, along with their reasoning for doing so.

Educate, Amuse, Enrich!

VRD

[vrdiver]

Are any results of the Trading HYP available, does anyone know?

Sadly no. Pyad fell out with TMF for a while and the HYP3 and 4 were never maintained.

TJH is probably the best documented trading HYP available, should you want a real example, although it's highly unlikely that he and pyad would have reached the same decisions at the same point in time, every time!

For a fuller discussion of why HYP3 & 4 are not available, you might wish to take a look at viewtopic.php?t=8081&start=20

VRD

[Dod101]

Thanks VRD. I do not think that I picked up on that thread at the time. The result of this thread seems to be that we would still be within the general rules/guidelines if we are indulging in some trading if it is generally for the purpose of looking after the income. I have not actually examined the guidelines for HYP Practical but I do not think that they exactly reflect pyad's original thoughts on the matter.

It won't make any difference to how I manage my HYP but interesting nevertheless.

Dod

[Bagger46]

I am new to posting here, but not new at the investing lark, having started in the early seventies on what has been a long and interesting journey.

I have never posted on either TMF or TLF, but been a reasonably frequent lurker so I am familiar with the various views.

Nowadays, I run two portfolios, one in my ISA, seeking a reasonably high yield(but much more interested in divi per income unit growth), and breaking just about every precept of pyad's (with no harm whatsoever to results as far as I can see since both portfolios are unitised and I can see what is going on vs my chosen benchmarks), the other broadly more growth oriented and much more ex-UK centred.

I sell occasionally for a wide variety of reasons, re balance regularly (which I consider useful in the HY portfolio), I hold back re investing divis occasionally if I feel markets are due for a set back, I freely make use of individual shares and ITs as both have their use and I find having 'rules' about that just plain silly. At present I am sitting on more cash than usual and will now re start to trickle this back into the market I see fit, there are good yields on offer, but quite a lot of concerns about the sustainability of some divis.

I topped up MNDI and CSN recently on weakness.

I am always amazed at this 'cult of pyad'. If I was to follow a HY approach, it would be more like TJH's, but even then I would find excluding ITs in a HYP, but allowing REITs, just silly and grossly illogical. The UK market is not the centre of my investing universe, nor are large caps.

None of my friend investors seem to have needed pyad's guidance to manage their investments, although quite a few(many of us are in our mid 70s) invest for income to support their pension, and others find reinvesting divis just plain common sense. I lucklily don't need the income at all, but at the moment I am using some of it to help a very elderly relative with his care/nursing costs.

Bagger

In case anyone should ask, Bagger46 because I did once invest in a 46 bagger, a warrant, although I have long stopped using any geared market instruments. In those days only a modest amount originally put in, else I would have been set up for life! These days unlikely to happen again since it would get rebalanced way before that. Like many of us, I have had occasional multi baggers and enough disasters, but when things look sombre on an investment I do tend to set stop loss markers. It proved useful with CLLN, for example.

[vrdiver]

I am new to posting here, but not new at the investing lark, having started in the early seventies on what has been a long and interesting journey.

I am always amazed at this 'cult of pyad'.

None of my friend investors seem to have needed pyad's guidance to manage their investments,

Congratulations on your first post! Whilst you have been lurking for a long time, it is only now that we can say "welcome"!

Re the "cult of pyad": I don't think it's a cult as such, but many of us were introduced to personal investing strategies by pyad (as opposed to having an IFA make the decisions) and his approach has served some of us rather well.

You mention you don't follow pyad's rules, nor do your friends need his guidance; it would be great if you could share your own methodology and explain how you and your friends got started in investing, especially as it would have been before the internet was available, so somewhat harder to get hold of relevant information.

Finally, as far as HYP and ITs go, HYP was designed to eliminate third party fees, whether from an IFA, pensions company or "complex product". There is no problem with running an IT portfolio alongside a HYP, but it's simpler not to mix the two concepts. Indeed, you may have read quite a few posts where investors are doing that, or migrating HYP holdings towards IT portfolios as they start to consider what happens when they no longer want to or are able to manage their finances. For clarity, HYP-P board talks about HYP shares whilst the IT board talks about ITs.

Anyhow, if you see another x46 bagger on the horizon, don't be shy about posting

VRD

[Bagger46]

I have just typed in a long reply, tried to preview it, and this blasted system has just gobbled it up and re asked me to login. No way I am doing this.

Bagger

[scrumpyjack]

'What PYAD has said about selling'

er, why is anyone interested? Is this the Delphic Oracle or something?

[Arborbridge]

I have just typed in a long reply, tried to preview it, and this blasted system has just gobbled it up and re asked me to login. No way I am doing this.

Bagger

Have you tried the back button on your browser? That has sometimes rescued me.

[Arborbridge]

'What PYAD has said about selling'

er, why is anyone interested? Is this the Delphic Oracle or something?

Yes, actually. But you knew that already, didn't you.
It should not surprise you to learn that many of us came to know about HYP by reading the very sensible and eloquent writings of PYAD, so what he says about his method is certainly of interest. It's his baby and what he says is fundamental if one is interested in HYPing. If you aren't, then it is of no consequence, clearly.

[Bagger46]

I have just typed in a long reply, tried to preview it, and this blasted system has just gobbled it up and re asked me to login. No way I am doing this.

Bagger

Have you tried the back button on your browser? That has sometimes rescued me.

Thanks, should of course have thought of that, but at the time I was cheesed off having put some effort in composing a suitable reply. Will in future.

Bagger

[Arborbridge]

I have just typed in a long reply, tried to preview it, and this blasted system has just gobbled it up and re asked me to login. No way I am doing this.

Bagger

Have you tried the back button on your browser? That has sometimes rescued me.

Thanks, should of course have thought of that, but at the time I was cheesed off having put some effort in composing a suitable reply. Will in future.

Bagger

Been there, done that - as I suspect many of us have. Quite often people say a post has vanished into the ether, so you are not alone - though that won't help much! Back button has saved me many times. All Hail, Back Button!!