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Labels. The potential for creating disagreement

Pull up a chair, have a biscuit - discuss the site and general questions about the LemonFool
DiamondEcho
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Re: Labels. The potential for creating disagreement

#190336

Postby DiamondEcho » January 1st, 2019, 9:50 am

What is the minimum capitalisation a HYPP pick should be? What's the FTSE average FY% and hence the hurdle rate% for a HYP pick - DAK?

melonfool
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Re: Labels. The potential for creating disagreement

#190373

Postby melonfool » January 1st, 2019, 1:13 pm

DiamondEcho wrote:What is the minimum capitalisation a HYPP pick should be? What's the FTSE average FY% and hence the hurdle rate% for a HYP pick - DAK?


I don't think it's appropriate for the board owners to dictate that sort of thing as it starts to look like investment advice which they are not qualified nor insured to give.

Mel

Itsallaguess
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Re: Labels. The potential for creating disagreement

#190376

Postby Itsallaguess » January 1st, 2019, 1:35 pm

DiamondEcho wrote:
No one can post what a 'model HYP' would be for a beginner right now, as no one can define what it is.

And then some wonder why there is disagreement...


I don't think that's quite true DE....

Gengulphus has been running his demo-HYP (GDHYP) for a number of years now, and I'd highly recommend anyone at all interested in the mechanics behind how a HYP might be both set up and then subsequently maintained to dive into some of the many threads that deal with his share-purchase decisions.

They really are a very good model on which individuals can really quite easily start to build their own income-investment processes...

Here's a link to the last one I'm aware of, from August of 2018 -

GDHYP purchase 51 - https://www.lemonfool.co.uk/viewtopic.php?f=15&t=13316

He actually uses a voting-system to help decide the potential and final share-purchase candidates, and uses a series of polls to do that. Here's a link to the first pre-poll for the above 51st GDHYP purchase -

GDHYP 51st purchase (pre-poll) - https://www.lemonfool.co.uk/viewtopic.php?f=15&t=13347

The above pre-poll thread is very useful, as within that thread you can start to see the process being used to filter down into a smaller list of shares, from which to pluck the final purchase-decision.

Gengulphus is always really good at providing URL links within his GDHYP threads that can lead to related GDHYP discussions and processes, so if anyone came to me and asked 'Where do I start?' with a potential HYP process, I'd always highly recommend people to grab themselves a big cup of coffee (or three!), and start to work through some of his decision-threads for the GDHYP portfolio.

Cheers,

Itsallaguess

TUK020
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Re: Labels. The potential for creating disagreement

#190385

Postby TUK020 » January 1st, 2019, 1:55 pm

In Dec 2015, Big G did a worked example of running a screen on the FTSE100, taking each sector, looking at the candidates, and working through the reasoning behind which one he would select for the portfolio.
It was probably the single most useful post that I read on TMF.
I keep on hoping that Gengulphus will repeat this some day, but recognise that it must have involved considerable work.

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Re: Labels. The potential for creating disagreement

#190387

Postby Itsallaguess » January 1st, 2019, 2:03 pm

TUK020 wrote:
In Dec 2015, Big G did a worked example of running a screen on the FTSE100, taking each sector, looking at the candidates, and working through the reasoning behind which one he would select for the portfolio.

It was probably the single most useful post that I read on TMF.

I keep on hoping that Gengulphus will repeat this some day, but recognise that it must have involved considerable work.


That's a great reminder, and I've managed to find a couple of threads discussing these screens, as well as a good whole-selection-process that JohnnyCyclops himself did back on TMF, which I've also got a link to via the WayBackMachine.

I now think it would be a shame to only post these types of links on this Biscuit-Bar thread, so I'm going to post over on HYP Practical, with the links that I've managed to collate, and I'll come back and provide a link on this thread to that HYP Practical one, to help keep things linked.

Cheers,

Itsallaguess

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Re: Labels. The potential for creating disagreement

#190390

Postby Itsallaguess » January 1st, 2019, 2:22 pm

Itsallaguess wrote:
TUK020 wrote:
In Dec 2015, Big G did a worked example of running a screen on the FTSE100, taking each sector, looking at the candidates, and working through the reasoning behind which one he would select for the portfolio.

It was probably the single most useful post that I read on TMF.

I keep on hoping that Gengulphus will repeat this some day, but recognise that it must have involved considerable work.


That's a great reminder, and I've managed to find a couple of threads discussing these screens, as well as a good whole-selection-process that JohnnyCyclops himself did back on TMF, which I've also got a link to via the WayBackMachine.

I now think it would be a shame to only post these types of links on this Biscuit-Bar thread, so I'm going to post over on HYP Practical, with the links that I've managed to collate, and I'll come back and provide a link on this thread to that HYP Practical one, to help keep things linked.


And here it is - https://www.lemonfool.co.uk/viewtopic.php?f=15&t=15470

I'm hoping TUK020, that one of the links on the above thread is the FTSE100 screen that you're thinking of, if you could perhaps take a look and confirm?

Cheers,

Itsallaguess

Gengulphus
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Re: Labels. The potential for creating disagreement

#190395

Postby Gengulphus » January 1st, 2019, 2:44 pm

DiamondEcho wrote:There aren't any guidelines, no 'set of 4-5 core rules, or tenets'. There's nothing by which a reader could sift their own HYP top-20/30 from the FTSE-350. No one posts such periodic sift-lists, like they used to do in years gone by, when we'd bicker whether say numbers 19-21 relatively merited being in or out for the time being.

No one can post what a 'model HYP' would be for a beginner right now, as no one can define what it is. And then some wonder why there is disagreement... :lol:

No - there are guidelines in the HYP Practical board's guidance. And no, anyone can give a definition of a 'model HYP' for a beginner and post what it is and what it contains. Provided their definition is consistent with the board guidance, they can post it on HYP Practical - if it isn't, High Yield Strategies & Shares will probably do (though if it doesn't even aim for high yield, Investment Strategies would be better and they'd do well to avoid the term "HYP" if they don't want to attract ridicule!). And the board guidance is quite deliberately guidelines and not instructions, because disagreement can be healthy, and the site owners (who set the areas each board covers) probably very definitely don't want to be giving exact instructions about how to invest according to a particular strategy - especially one that AFAIAA they themselves don't particularly follow.

And anyone who wonders about there being disagreement at all really cannot be living in the real world - disagreement is all around us and in every sphere of life! At least my wonder is about the fact that some people persist in posting stuff that is not consistent with the HYP Practical board's guidance on that board, where it has a proven track record of provoking disagreement of the unhealthy argumentative bickering variety and consequent moderator action.

DiamondEcho wrote:What is the minimum capitalisation a HYPP pick should be? What's the FTSE average FY% and hence the hurdle rate% for a HYP pick - DAK?

For the FTSE 100 yield, see https://markets.ft.com/data/indices/tea ... =UKX.D:FSI. I cannot say for certain that it gives the official figures according to FTSE themselves (who seem very reticent about giving exact figures on free-access parts of their website these days, though I might of course have missed something), but on those occasions that I've been able to check in the past, there's never been a difference - so I very strongly suspect that the FT figures come straight from a FTSE feed.

Dividenddata is an alternative source. It definitely doesn't use a FTSE feed, as it often gives slightly different values (e.g. 4.80% vs 4.68% at present). My working hypothesis about why they're slightly different is that they bring newly-declared dividends into the calculation as soon as they're declared, while the FT / FTSE figures bring them in typically some weeks later when they go ex-dividend.

Once you've settled on which figure you use and on a few other detailed decisions (e.g. whether you're looking at companies' historical, rolling historical or forecast yields), you just need to get hold of a list of FTSE 350 constituents, get hold of their yields (of your chosen kind) and market capitalisations, filter the list to eliminate companies with yields below the FTSE 100's and see what the minimum capitalisation is of those that are left. Check the company that has that minimum capitalisation for being a non-REIT investment trust: if so, filter it out as well and look for what is now the minimum capitalisation on the list. Repeat until the company with that minimum capitalisation is a REIT or not an investment trust at all. You now know what the minimum capitalisation of a HYPP pick is, at least for your choices.

That's fully consistent with it being guidance and not instructions. It gives you useful information to help you find answers to your questions without dictating exactly what those answers should be. Finding them in that way is doubtless a non-trivial piece of work, but it really isn't the function of board guidance to say that board users are obliged to do such work for each other - and I'm pretty certain that if it did try to do that, most users would either ignore it or stop using the board! Basically, if you want the job done, either hope that a board user does it voluntarily and posts the results, or do it yourself...

And yes, the answer that method produces is likely to vary somewhat for all sorts of reasons, including the exact time and date that it's calculated, what source is used for FTSE 100 yield, what form of a share's yield one chooses to use, etc. Hopefully the moderators are fully aware of that and will use their discretion not to take action if a proposed HYP pick is only marginally below the FTSE 100 yield (*).

I would add that the answer that method produces is not one that I see any real use for. In particular, it's not needed to decide whether a HYP pick one has in mind is suitable for posting on HYP Practical. All that's needed for that are:

* A quick check on the company's FTSE 350 membership (the LSE's page about the share is my standard place for that - e.g. for Greene King, https://www.londonstockexchange.com/exc ... ml?lang=en tells me that its FTSE index membership is currently "FTSE 250,FTSE MID 250 (ex IT),FTSE 350,FTSE 350 High Yield,FTSE 350 (ex IT),FTSE All-Share,FTSE All-Share (ex IT)") and that it isn't a non-REIT investment trust (the same check does the job - just look for "FTSE 350 (ex IT)" in the list rather than just "FTSE 350").

* A quick check using either of the above links on the FTSE 100 yield.

* Knowledge of the company's yield - which I would say was essential anyway for deciding whether it was a HYP pick of any kind at all, whether suitable for posting to HYP Practical or not!

So I'm not saying that anyone needs to answer your question "What is the minimum capitalisation a HYPP pick should be?", any more than they need to answer e.g. the question "which HYPP pick's CEO has the alphabetically-first surname?" or many other similar questions about HYPP picks one might take it into one's head to ask. Just that the board guidance does provide a bit of help about how one might go about answering such questions, for anyone who for whatever reason wants those answers enough to put in the work required...

(*) Personally, if I were a moderator, I would probably allow about a 10% margin below the FT / FTSE figure and wouldn't bother about the second decimal place in company yield figures, so at present wouldn't regard any yield of 4.2% or above as worth taking action on. I emphasise though that I am not a moderator and so that isn't something to be relied upon!

Gengulphus

TUK020
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Re: Labels. The potential for creating disagreement

#190403

Postby TUK020 » January 1st, 2019, 3:19 pm

Itsallaguess wrote:
And here it is - https://www.lemonfool.co.uk/viewtopic.php?f=15&t=15470

I'm hoping TUK020, that one of the links on the above thread is the FTSE100 screen that you're thinking of, if you could perhaps take a look and confirm?

Cheers,

Itsallaguess

It is indeed buried in there.
On UHYP15, the thread starts with a screener dated 1/12/15, and then about half way down the thread is the next stage, of taking candidates and selecting one for each sector, giving the reasons, dated 5/12/15.
Whole exercise is a wonderful demonstration of how to go about selecting a Bland Annuity Replacement portfolio from scratch.

DiamondEcho
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Re: Labels. The potential for creating disagreement

#190412

Postby DiamondEcho » January 1st, 2019, 3:59 pm

melonfool wrote:
DiamondEcho wrote:What is the minimum capitalisation a HYPP pick should be? What's the FTSE average FY% and hence the hurdle rate% for a HYP pick - DAK?

I don't think it's appropriate for the board owners to dictate that sort of thing as it starts to look like investment advice which they are not qualified nor insured to give. Mel


'Dictated'? No one is forced to follow the principles of Benjamin Gramham's Dividend Investing strategy, ie a modern day iteration of this board, any more than someone finding a bible or koran in the bed-side cabinet drawer of their hotel room. I do wonder how a Mod moderates a board when the place has no parameters [HYP, not here]. Do any stock boards have parameters?

Last time I questioned this it played out the same way 'We all follow a very clear strategy - but seeking to define it is invalid/off-topic/taboo'.

Lootman
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Re: Labels. The potential for creating disagreement

#190418

Postby Lootman » January 1st, 2019, 4:08 pm

DiamondEcho wrote:there is no published strategy, and hence the board is a rudderless mish-mash of pretty much any stocks that individual posters own and feel qualifies, whether they do or not. ... I wonder how the Mods deem a stock discussed here as off-topic? Such Modding used to be a periodic event, but not recently.

That's certainly one way to look at it, although it seems the official view is that the rather nebulous nature of HYP is actually planned and constitutes a virtue. Quoting directly from the HYP-P board guidance:
Selection criteria may include the yield, the dividend record and a history of increases. Debt level and free cash flow should be considered. Personal feelings can affect the choice, including ethical considerations. Additional criteria may be used by individuals.

In other words the method is designed to be flexible and customisable. The words "may", "can" and should" are used there rather "must" and "shall". Which in turns means that there is no ideal HYP. Every version can look different, although in practice many of them look similar.

DiamondEcho wrote:@TJH, I tried doing that in 2017. Dredged up the original 'ethos' and tried to wiki updated metrics here. IIRC the whole thing descended into infighting over what a HYP actually is. People have created their own ethos's [!?] and get very defensive that they are on the one true path. Perhaps we start with Benjamin Graham again? ...
ps. TJH, I remember you as being one of the old-school HYPers, you certainly seemed to know the metrics, as IIRC you set the metrics for use of the the HYPTUSS etc.

The problem with referring to any "original" document is that it is 20 or so years out of date, and so it won't capture all the changes and improvements made over all that time, as well as of course many years of seeing what actually worked in practice and what did not work. The 2007-2009 market collapse, for instance, revealed shortcomings in the original model.

Also, as you appear to be aware, TJH has been running a HYP for long before that "original" document, and he has impeccable records to back it up. I take the view that he is the most knowledgeable person here on this subject, and so it is a good thing that he wrote the HY board guidelines.

DiamondEcho wrote:HYP IS a strategy, one must be able to define what it is, and hence what investments currently qualify. Hint: it's broadly lifted from Benjamin Graham's theory of Dividend Investing, just made even simpler by setting hurdle rates for capitalisation/FY%/etc. It was meant to be simple, Doris wasn't expected to become Einstein to build her pension :lol:

Reflecting the flexibility noted above, the method can be decomposed into a few "bullet point" rules from which you can pick and choose, mix and match. Perhaps they should be considered optional precepts. So not everyone avoids tinkering, for instance. Not everyone equal-weights their purchases. Not everyone restricts themselves to UK shares or large caps. And so on.

Its fluidity is its power. The price of that can be frustration, especially as there are no textbooks on the subject to refer to. You just have to learn by osmosis. Or make it up as you go along ;)

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Re: Labels. The potential for creating disagreement

#190429

Postby melonfool » January 1st, 2019, 4:40 pm

DiamondEcho wrote:
melonfool wrote:
DiamondEcho wrote:What is the minimum capitalisation a HYPP pick should be? What's the FTSE average FY% and hence the hurdle rate% for a HYP pick - DAK?

I don't think it's appropriate for the board owners to dictate that sort of thing as it starts to look like investment advice which they are not qualified nor insured to give. Mel


'Dictated'? No one is forced to follow the principles of Benjamin Gramham's Dividend Investing strategy, ie a modern day iteration of this board, any more than someone finding a bible or koran in the bed-side cabinet drawer of their hotel room. I do wonder how a Mod moderates a board when the place has no parameters [HYP, not here]. Do any stock boards have parameters?

Last time I questioned this it played out the same way 'We all follow a very clear strategy - but seeking to define it is invalid/off-topic/taboo'.


I have no idea about other 'stock boards', nor even what a 'stock board' is but I rather gather that many investment discussion fora are not moderated at all, and people who prefer that are free to go and post there, of course.

If you think there needs to be a 'minimum capitalisation a HYPP [sic] pick should be' then you are expecting that to be dictated. I'm not sure why you have an issue with the word I use to describe what you have requested. The definition on dictionary.com (other dictionaries are available), is:

dictate
verb
/dɪkˈteɪt/Submit
1.
state or order authoritatively.
"the tsar's attempts to dictate policy"
synonyms: give orders to, order about/around, boss (about/around), impose one's will on, lord it over, bully, domineer, dominate, tyrannize, oppress, ride roughshod over, control, pressurize, browbeat;


And if the board owners were to state something, considering they have some authority being the board owners, that could indeed be seen as dictating.

Nothing in the definition implies it is *mandatory* to follow it. My father dictated all sorts of nonsense which I routinely ignored.

Mel

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Re: Labels. The potential for creating disagreement

#190435

Postby tjh290633 » January 1st, 2019, 5:09 pm

DiamondEcho

Yes, the HYPTUSS is based on my method for ranking shares for topping up. As for selecting shares for a new HYP, the procedure is well known. You rank the shares in the FTSE350 (or whichever group you choose) by yield, eliminate any obvious outliers, then work down the list taking one share from each sector)/subsector until you have at least 15 selected. If you get down to the current market yield, stop. Go back to the beginning and start doubling up on sectors. 15 is the absolute minimum number which you should pick, but there is no higher limit. Probably about 40 is a comfortable maximum, but it is purely a matter of choice.

Once you have the portfolio, how you manage it is up to you. My choice is to limit the weight of any one holding and to cull shares whose yield falls below half the market yield. I also like to put a limit on the proportion of dividend income provided by any one share and on the share of portfolio cost taken by any one share. Those limits are a matter for personal choice.

That's not too difficult, is it? Why not give it a try?

TJH

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Re: Labels. The potential for creating disagreement

#190454

Postby DiamondEcho » January 1st, 2019, 7:12 pm

Thanks TJH, nice to be reminded of that, after a very long time. I shall take that away and consider.

I fear you will now have either invoked a silence, or a pogrom :lol:

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Re: Labels. The potential for creating disagreement

#190476

Postby tjh290633 » January 1st, 2019, 10:44 pm

DiamondEcho wrote:Thanks TJH, nice to be reminded of that, after a very long time. I shall take that away and consider.

I fear you will now have either invoked a silence, or a pogrom :lol:


I shall look forward to you breaking your silence.

TJH

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Re: Labels. The potential for creating disagreement

#190492

Postby Gengulphus » January 2nd, 2019, 2:13 am

DiamondEcho wrote:Last time I questioned this it played out the same way 'We all follow a very clear strategy - but seeking to define it is invalid/off-topic/taboo'.

The following would be closer: "Each of us follows a clear strategy. They are different strategies for different ones of us, but they are all within the same general area, as defined by the board guidance. When posting to the board, you are entirely free to define your strategy as long as it is within that general area (and indeed defining it would often be welcome background to explain things said about what you would do in practice). However, posting about strategies outside that general area is invalid/off-topic/taboo." And I would personally add "Contrasting different strategies within the general area can be useful, but heated arguments about which of them is better are invalid/off-topic/taboo. So are statements along the lines that only some of them are 'true HYP'." - but I'm not clear about whether that actually is the case as far as TLF's admins and moderators are concerned.

So for instance, the strategy tjh290633 uses for his HYP and the strategy I use for GDHYP are clearly different in a number of respects, such as:

* He has a very clearly-defined selling strategy for trimming back holdings that grow larger than his comfort level of 150% of median, and a somewhat less clearly-defined one for complete sales of holdings whose yield has dropped too low. I only sell in GDHYP for 'administrative' reasons, i.e. when continuing to hold would create disproportionate (IMHO) administrative complications for me (*).

* I base my decisions on forecast yields (among other things), while he basically ignores forecasts and uses historical data only.

* He makes all his purchase decisions himself, while I (for GDHYP, not my main HYP) largely use other people's views on which shares to buy, as determined by a polling process on TLF (or previously TMF).

But they're both within the general area defined by the board guidance, and so freely discussable on the HYP Practical board. And both of us have posted definitions of what we do, without encountering significant problems (AFAIAA in tjh290633's case, of course). But we doubtless would if either of us were to try to proselytise our own strategy as the one-and-only 'true' HYP strategy!

Edit: One final comment is that I said at the start that my statement would be "closer" - I really do mean that and not "absolutely spot-on"! I'm fully aware for example that quite a few users of the HYP Practical board seem to be rather unclear about some aspects of their strategies. For instance, there are not-infrequent questions about whether a HYP share should be sold, which at least strongly suggest that the questioner is less than clear about the selling part of their strategy. That's variation within the board guidance, though, unless it's coming up so often that it brings their compliance with the LTBH aspect of the guidance into question.

(*) There have been two cases of that in GDHYP's 10.5-year history to date: BHP Billiton's demerger of South32, and Vodafone's distribution of its holding of Verizon Communications shares.

Gengulphus


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