End of year values

[Walkeia]

2021 performance: +31%

I stick with my very light touch portfolio of ~60% VWRL and the balance in 4-5 investment trusts / REITs which I follow closely. Throw in some very cheap leverage from interactive brokers (10-25%) and you get to the return figures.

Doesn’t include: VCTs and properties.

On the positive side the portfolio is on auto pilot … but perhaps in 2022 I can kick the habit of the daily login on the phone to get a live valuation.

I have been reducing leverage/borrowings since the spring in anticipation of higher interest rates and the portfolio will be unlevered by the end of Q1. Hindsight is a wonderful thing but continuing my monthly investments would have performed better. I will have an excess cash balance at this point (spring); would people:

a. continue to invest in the gone fishing portfolio
b. clear all remaining borrowings (two mortgages)
c. something different like add a different asset class, if so what?

I am tempted by B as I am struggling with valuations here but it does seem somewhat strange to be paying down debt with inflation high. The idea being it would leave me in a very strong position should opportunities arise. I would be interested in others thoughts, many thanks,

Walkeia

[tjh290633]

My habit has been to keep a record of the annual change in share price of my various holdings. This often reveals that last year's losers are this year's winners and vice versa.

Oh no it doesn't

Take each years 5 worst and equal weight them at the start of the next year, hold for the year, and 2016 to 2021 inclusive compounded to a -5% loss or thereabouts.

I can counter that with a few examples. Just look at the fortunes of the 5 worst in 2015, ignoring PFL which I sold the next year:

Year   S32       BLT/BHP   PSON      IMI       RDSB      FTSE100
2015   -49.52%   -45.26%   -38.15%   -31.79%   -30.90%    -4.93%
2016   207.62%    71.91%    11.21%    20.72%    52.56%    14.43%
2017    25.54%    16.52%   -10.18%    28.71%     6.56%     7.63%
2018    -9.25%    -8.48%    27.50%   -29.18%    -6.72%   -12.48%
2019   -23.37%     7.58%   -32.12%    24.89%    -4.29%    12.10%
2020    -0.01%     8.34%     6.81%    -1.19%   -43.76%   -14.34%
2021    55.69%    14.26%    -9.81%    49.01%    28.82%    14.30%

Apart from Pearson, they all beat the FTSE in 2016 and 2017, but RDSB fell below the FTSE that year. IMI was a laggard in 2018 but was the only one to beat the FTSE in 2019. In 2020, only RDSB lagged behind while in 2021 BHP and PSON fell back.

Looking at the bottom 6 and top 6 in those years:

Bottom 6    2015     2016   2017    2018    2019    2020    2021
      31   RDSB    BLND     IMB    VOD     BP.     BT.A    RKT  
      32   IMI     CLLN @   SSE    KGF     MKS     MKS     IGG@ 
      33   PSON    BT.A     GSK    SMDS    BT.A    MARS-   VOD  
      34   PFL     MKS      MARS   BATS    IMB     LLOY    PSON-
      35   BLT     TW.-     BT.A   WMH     S32     RDSB    ULVR 
      36   S32 @   WMH      CLLN   CLLN*   PSON-   BP.     RIO- 
                                                                
Top6        2015     2016   2017    2018    2019    2020    2021
       1   TW.     S32+     INDV   PSON    SGRO    WMH*    MKS+ 
       2   REX     BLT+     TW.    AZN     TW.     ADM     S32  
       3   IMT     PFL *+   DGE    GSK+    MARS    KGF     SGRO 
       4   INDV    INDV     IMI    BHP     TSCO    RIO     IMI  
       5   ADM     RDSB+    SGRO   CPG     SSE     BHP     DGE  
       6   SMDS    BP.      SMDS   DGE     LGEN    PSON+   LLOY

I have marked those that went from bottom 6 to top 6, in the following year, with a "+" and those which went the other way with a "-".

Those are the extreme changes, and it is not always so dramatic as was 2015 to 2016.

TJH

[Dod101]

I'm not sure if the problem at HFEL is going to last forever, but it certainly hasn't done well for a couple of years. Before that, I was getting XIRRs of double figures - 10-12%, but since then it has halved.

How can we tell whether such a problem is temporary, to stop us bailing out as the wrong time - sometimes at a loss ? That's why I don't often make changes.

Considering some of the dunces big increases, have you ever tried investing in last year's failures? Might be better than selling out of them

Arb.

Looking at what's reported at HL, a near 8% yield on the IT trading at a small premium, I reckon it's worth hanging on at HFEL. I am not at all keen on three Chinese banks being in the top ten holdings. But I think a return to modest capital growth could be on the cards. I suspect too that selling some future growth options to boost income will continue to be a drag though.

My bold. I always take HL's IT weightings with a pinch of salt as going to the source often gives a different picture.

Looking here: https://www.janushenderson.com/en-gb/in ... e-limited/

and scrolling to portfolio gives a different picture, albeit dated 30/11/2021, I suspect still more up to date than HL (where else would HL get their information?). The three banks are not to be seen in the top ten and looking at country weightings, China shows as just over 11% as opposed to HL's opinion that it is 28%.

I agree it's worth hanging on and have no plans to sell out of HFEL currently as, although I would also like to see a little more upward movement in capital values, this holding was bought primarily for income. My XIRR at 31/12/2021 is still a positive number (2.55%).

My portfolio value overall is up 15.3% since 1/1/2021.

Ian

I am just about to sell the remainder of my HFEL. I too need income but not at the expense of my capital. And I certainly agree about not relying on third party sites for info. There is no reason to especially as all companies now have individual sites with more probably more reliable information.

Dod

[absolutezero]

I am just about to sell the remainder of my HFEL. I too need income but not at the expense of my capital.

All income is at the expense of your capital, given the share price drops by the divided amount on XD day.

[Dod101]

I am just about to sell the remainder of my HFEL. I too need income but not at the expense of my capital.

All income is at the expense of your capital, given the share price drops by the divided amount on XD day.

I am well aware of that bit of theory, and I am sorry to say that I will probably insult you by pointing out what I mean (You will know it already) On 10 August 2018, when I first bought HFEL, the price was £3.675; today it is £2.95.

The other more spectacular example of 'buying income' is Imperial Brands where the price on that same date was around £26.385; today £16.165.

These have both been, at least in recent years very poor investments by any measure. I still hold Imperial Brands having bought them on account of the decent yield. The difference between the two shares is that my Imperial Brands are 'free' in the sense that having held them for about 20 years or so, I have long since extracted far more than my original cost price. The same cannot be said for HFEL and I do not want to repeat the error.

My experience with Imperial Brands is a good reason for extracting some gain whilst the going is good, as I do with most shares when they have had a good run.

Dod

[SoBo65]

I closed the year at +18.6%, which given how risk averse I became in the second half is a result I am very happy with.

Holding % Portfolio
Personal Assets IT 28.8%
Capital Gearing IT 9.8%
Scottish Mortgage IT 5.1%
Finsbury Growth & IT 4.4%
Caledonia Investments 4.4%
RIT Capital Partners 4.4%
Edinburgh IT 4.2%
Mid Wynd Int IT 3.9%
Fundsmith Equity 3.2%
North Atlantic Smaller Co IT 2.5%
Brunner IT 2.2%
Independent IT 1.9%
Rights & Issues IT 1.4%
Supermarket Income REIT 1.4%
Treatt 1.2%
MP Evans 1.0%
Cash 20.2%

[Dod101]

I closed the year at +18.6%, which given how risk averse I became in the second half is a result I am very happy with.

Holding % Portfolio
Personal Assets IT 28.8%
Capital Gearing IT 9.8%
Scottish Mortgage IT 5.1%
Finsbury Growth & IT 4.4%
Caledonia Investments 4.4%
RIT Capital Partners 4.4%
Edinburgh IT 4.2%
Mid Wynd Int IT 3.9%
Fundsmith Equity 3.2%
North Atlantic Smaller Co IT 2.5%
Brunner IT 2.2%
Independent IT 1.9%
Rights & Issues IT 1.4%
Supermarket Income REIT 1.4%
Treatt 1.2%
MP Evans 1.0%
Cash 20.2%

Well done. I hold some of these but you hold more growth shares than I do and my growth investments have also done very well. I am though primarily investing for income and these, in a UK context anyway, have been pretty poor.

Dod

[AsleepInYorkshire]

I closed the year at +18.6%, which given how risk averse I became in the second half is a result I am very happy with.

Holding % Portfolio
Personal Assets IT 28.8%
Capital Gearing IT 9.8%
Scottish Mortgage IT 5.1%
Finsbury Growth & IT 4.4%
Caledonia Investments 4.4%
RIT Capital Partners 4.4%
Edinburgh IT 4.2%
Mid Wynd Int IT 3.9%
Fundsmith Equity 3.2%
North Atlantic Smaller Co IT 2.5%
Brunner IT 2.2%
Independent IT 1.9%
Rights & Issues IT 1.4%
Supermarket Income REIT 1.4%
Treatt 1.2%
MP Evans 1.0%
Cash 20.2%

Well done. I hold some of these but you hold more growth shares than I do and my growth investments have also done very well. I am though primarily investing for income and these, in a UK context anyway, have been pretty poor.

Dod

May I ask if you had a long term plan please Dod?

Did you hold growth stocks and switch to income gradually and did you have a portfolio value that triggered that?

Thank you

Take care

AiY(D)

[Dod101]

May I ask if you had a long term plan please Dod?

Did you hold growth stocks and switch to income gradually and did you have a portfolio value that triggered that?

Thank you

Take care

AiY(D)

That is an interesting question because I have just spent some of this evening doing my figures for 2021. I have a ratio of about 70% high yield shares from which I get about 90% of my income and the balance from growth shares. I started off just buying shares I thought I liked with the emphasis on the yield because I need an income.

Last year my high yield portfolio had a yield of 4.71%, with growth of only about 6.02% against the growth portfolio which had a yield of about 1.23% but the growth was 22.04%. Each was therefore doing what was required but the overall portfolio growth from the combined portfolio was a bit disappointing at only 10.4% with a yield of 3.66%. Contained in the high yield portfolio are four bond funds which are now not helping the returns and i may consider getting rid of them. They have done me quite well until very recently but if interest rates do rise significantly (and I expect them to) then their capital values are bound to reduce.

All of this is subject to some careful checking tomorrow but it is an interesting exercise.

Dod

[GoSeigen]

I am just about to sell the remainder of my HFEL. I too need income but not at the expense of my capital.

All income is at the expense of your capital, given the share price drops by the divided amount on XD day.

I am well aware of that bit of theory, and I am sorry to say that I will probably insult you by pointing out what I mean (You will know it already) On 10 August 2018, when I first bought HFEL, the price was £3.675; today it is £2.95.

The other more spectacular example of 'buying income' is Imperial Brands where the price on that same date was around £26.385; today £16.165.

These have both been, at least in recent years very poor investments by any measure. I still hold Imperial Brands having bought them on account of the decent yield. The difference between the two shares is that my Imperial Brands are 'free' in the sense that having held them for about 20 years or so, I have long since extracted far more than my original cost price. The same cannot be said for HFEL and I do not want to repeat the error.

My experience with Imperial Brands is a good reason for extracting some gain whilst the going is good, as I do with most shares when they have had a good run.

Dod

In bond terms this situation is easy to describe: the coupon (dividend) is higher than the yield/earnings. This has been the source of my long-held criticism/scepticism of high yield equity income strategies. Amazing how avidly people believe that shares and bonds are not comparable...

GS

[Dod101]

All income is at the expense of your capital, given the share price drops by the divided amount on XD day.

I am well aware of that bit of theory, and I am sorry to say that I will probably insult you by pointing out what I mean (You will know it already) On 10 August 2018, when I first bought HFEL, the price was £3.675; today it is £2.95.

The other more spectacular example of 'buying income' is Imperial Brands where the price on that same date was around £26.385; today £16.165.

These have both been, at least in recent years very poor investments by any measure. I still hold Imperial Brands having bought them on account of the decent yield. The difference between the two shares is that my Imperial Brands are 'free' in the sense that having held them for about 20 years or so, I have long since extracted far more than my original cost price. The same cannot be said for HFEL and I do not want to repeat the error.

My experience with Imperial Brands is a good reason for extracting some gain whilst the going is good, as I do with most shares when they have had a good run.

Dod

In bond terms this situation is easy to describe: the coupon (dividend) is higher than the yield/earnings. This has been the source of my long-held criticism/scepticism of high yield equity income strategies. Amazing how avidly people believe that shares and bonds are not comparable...

GS

Agreed and of course some Boards want to maintain that coupon (dividend) at almost any cost, see the above Imperial Brands but also HSBC and Shell to name but another two which I hold. I have moved away from very high yielders in favour of much more modest but I think sustainable yields where, as far as I can tell, the distributions are well within the real earnings.

Dod

[Arborbridge]

I am just about to sell the remainder of my HFEL. I too need income but not at the expense of my capital. And I certainly agree about not relying on third party sites for info. There is no reason to especially as all companies now have individual sites with more probably more reliable information.

Dod

I'm holding on to mine, but almost certainly not adding. It'll be interesting to see what you put the resulting cash into and compare in a couple of year's time. With a collective investment, unlike a single share, one is possibly always better off buying in the dips since rarely do they fail outright. While waiting for the price to recover, I still receive an income, which is what I bought it for, in the case of HFEL.

Of course, it bothers me that HFEL has had a bad run, but I've seen ITs evolve often enough not to be particularly disturbed by it. When TMPL took a tumble, I should have had some guts and bought more, but didn't. - that would have shown a nice profit.

Without those twin scourges: failure of imagination and failure of courage, I might have been a multi-millionaire


Arb.

[monabri]

Might be worth taking discussions on HFEL to a separate post or to here

viewtopic.php?p=410271#p410271

( The OP has moved the topic of the post from the original OP, so maybe move to another post....... started by the OP?)

[Dod101]

I am just about to sell the remainder of my HFEL. I too need income but not at the expense of my capital. And I certainly agree about not relying on third party sites for info. There is no reason to especially as all companies now have individual sites with more probably more reliable information.

Dod

I'm holding on to mine, but almost certainly not adding. It'll be interesting to see what you put the resulting cash into and compare in a couple of year's time. With a collective investment, unlike a single share, one is possibly always better off buying in the dips since rarely do they fail outright. While waiting for the price to recover, I still receive an income, which is what I bought it for, in the case of HFEL.

Of course, it bothers me that HFEL has had a bad run, but I've seen ITs evolve often enough not to be particularly disturbed by it. When TMPL took a tumble, I should have had some guts and bought more, but didn't. - that would have shown a nice profit.

Without those twin scourges: failure of imagination and failure of courage, I might have been a multi-millionaire


Arb.

I am thinking of being buying another Canadian bank. My TD Bank shares have a modest yield of around 2.70% and a capital increase of around 38% for the year, with a promised double digit growth in the dividend for the next financial year. And they are awash with cash. They have just announced a share buyback.

I currently hold them in my SIPP so that I can retain the dividends in CanD until I decide whether to reinvest or convert to sterling once a year. That saves on exchange costs.

Dod

[Dod101]

Might be worth taking discussions on HFEL to a separate post or to here

viewtopic.php?p=410271#p410271

( The OP has moved the topic of the post from the original OP, so maybe move to another post....... started by the OP?)

Thanks monabri, but HFEL has been exhaustively discussed I think on the thread you highlighted. I think though that this is not altogether off topic; it still seems to fit a discussion on 'End of year values' but you are of course entitled to think oltherwise.

Dod

[richfool]

On the subject of HFEL, I sold out some years ago, as I didn't like HFEL's higher yield apparently being at the expense of poorer capital performance. I preferred its peers for their lower yield, but superior capital growth performance. (I vaguely recollect that at that time it also had a higher exposure to China which I wasn't keen on).

However after increasing my portfolio's exposure to growth through 2020-2021, in 2021 I gradually moved the emphasis back towards income. Following on from that, I did, ironically, more recently, buy a small amount of HFEL again, as a sort of "income enhancer", one where I wouldn't worry so much about the capital element. I also liked HFEL's exposure to Australia (and Vietnam - small amount) and it's reduced exposure to China (c 11%). So HFEL sits with the likes of (REIT) EPIC and LGEN in my IT portfolio, as income enhancers/boosters.

[Arborbridge]

On the subject of HFEL, I sold out some years ago, as I didn't like HFEL's higher yield apparently being at the expense of poorer capital performance. I preferred its peers for their lower yield, but superior capital growth performance. (I vaguely recollect that at that time it also had a higher exposure to China which I wasn't keen on).

However after increasing my portfolio's exposure to growth through 2020-2021, in 2021 I gradually moved the emphasis back towards income. Following on from that, I did more recently, add HFEL as a sort of "income enhancer", one where I wouldn't worry so much about the capital element. I also liked HFEL's exposure to Australia (and Vietnam - small amount) and it's reduced exposure to China (c 11%). So HFEL sits with the likes of (REIT) EPIC and LGEN in my IT portfolio, as income enhancers/boosters.

That's more or less why I bought it, and MRCH too. It bolsters income for little effort and I have other ITs which are better on the capital side. The theory was, that the lower yield high growth type investments would become more significant in time, but that hasn't happened yet. ITs like the two I've mentioned are still among the four or five "big hitters" in my income portfolio. But since I will probably have them until the day I give up, the capital does not worry me too much.

[BullDog]

On the subject of HFEL, I sold out some years ago, as I didn't like HFEL's higher yield apparently being at the expense of poorer capital performance. I preferred its peers for their lower yield, but superior capital growth performance. (I vaguely recollect that at that time it also had a higher exposure to China which I wasn't keen on).

However after increasing my portfolio's exposure to growth through 2020-2021, in 2021 I gradually moved the emphasis back towards income. Following on from that, I did more recently, add HFEL as a sort of "income enhancer", one where I wouldn't worry so much about the capital element. I also liked HFEL's exposure to Australia (and Vietnam - small amount) and it's reduced exposure to China (c 11%). So HFEL sits with the likes of (REIT) EPIC and LGEN in my IT portfolio, as income enhancers/boosters.

I think that's the right way to look at HFEL. And you have the advantage of buying HFEL more recently at lower share price. I have some HFEL in a similar way myself. I do hope for some modest capital growth medium term, but it's not the end of the world if that doesn't happen. I have other stuff for that purpose.

[Dod101]

On the subject of HFEL, I sold out some years ago, as I didn't like HFEL's higher yield apparently being at the expense of poorer capital performance. I preferred its peers for their lower yield, but superior capital growth performance. (I vaguely recollect that at that time it also had a higher exposure to China which I wasn't keen on).

However after increasing my portfolio's exposure to growth through 2020-2021, in 2021 I gradually moved the emphasis back towards income. Following on from that, I did, ironically, more recently, buy a small amount of HFEL again, as a sort of "income enhancer", one where I wouldn't worry so much about the capital element. I also liked HFEL's exposure to Australia (and Vietnam - small amount) and it's reduced exposure to China (c 11%). So HFEL sits with the likes of (REIT) EPIC and LGEN in my IT portfolio, as income enhancers/boosters.

I had not thought to compare HFEL with say Legal & General. Interesting if you look purely at the income. However, the yield on HFEL was more or less absorbed by its loss of capital, whereas with L & G the trailing yield was 5.99% and the capital gain on the share price was 11.76%, a total return of nearly 18%, not spectacular but quite acceptable to me for such a steady performer. And of course LGEN should not be sitting in your IT portfolio, if, that is you mean Legal & General by LGEN.

Dod

[bonrepos]

JLEN?