Remove ads

Introducing the LemonFools Personal Finance Calculators

LuniHYP250: Year 6 review

Practical discussions about equity High-Yield Portfolios (HYP) for income
Forum rules
Tight HYP discussions only please - OT please discuss in strategies
Luniversal
Posts: 15
Joined: November 4th, 2016, 11:01 am
Been thanked: 134 times

LuniHYP250: Year 6 review

#152241

Postby Luniversal » July 13th, 2018, 6:56 pm

Here is reviewed the latest year of what began as a 20-share 'Midcaps HYP' on The Motley Fool. It is now called LuniHYP250, since it consists of FTSE 250 companies, although none was valued at less than £500m on purchase. Choices were on standard 'pyadic' tests, e.g. dividend history, gearing, sectoral separation. No tinkering, no capital added since it was bought on Jul. 12, 2012.

Constituents at launch:

Amlin (AML)*
Balfour Beatty (BBY)
Berendsen (BRSN)*
Chemring (CHG)
Cineworld (CINE)
Close Brothers (CBG)
Cranswick (CWK)
Go-Ahead (GOG)
Greene King (GNK)
Greggs (GRG)
HICL Infrastructure (HICL)
IG (IGG)
Inmarsat (ISAT)
moneysupermarket (MONY)
N Brown (BWNG)
Premier Farnell (PFL)*
Provident Financial (PFG)
Tullett Prebon (TLPR), renamed TP ICAP (TCAP)
UBM (UBM)*
UK Commercial Property (UKCM)

*Taken over

Later substitutions and additions:

Weir (WEIR), Feb. 2016
Ashmore (ASHM), Mar. 2017
PayPoint (PAY), Oct. 2017
Essentra (ESNT), Nov. 2017
Bellway (BWY), Mar. 2018
William Hill (WMH), Jun. 2018
John Wood (WG.), Jun. 2018

Original cost after expenses was £23,949. Later buys were at the same unit cost as at first: <=£1,200 per share.


INCOME


HYPs are about income. This concept stemmed from hopes that periodic income would rise faster, if more bumpily, than in my Footsie HYPs. Wrong! Regular interims and finals grew by only 2-3% pa in this decade, close to inflation:

2011-12 (equivalent for year before acquisition): £1,216
----------------------------------------------------------------------------------------
2012-13: £1,241, +2.1% equivalent
2013-14: £1,273, +2.6%
2014-15: £1,299, +2.0%
2015-16: £1,305, +0.5%
2016-17: £1,365, +4.6%
2017-18: £1,308, -4.1%

LuniHYP250 has produced £7,791 of routine payouts to date, from a very mixed bag.

Chemring and Balfour Beatty ceased paying entirely, then resumed at far lower rates; Provident Financial, previously the biggest dispenser in the portfolio, may do likewise. Inmarsat has lately chopped its payout. Freezes are in force at UKCM, Weir, N Brown and TP ICAP. Best gains in income arose from Cranswick, Greggs and Cineworld, though CINE's shrank after its stonker of a rights issue (see below).

LuniHYP250's average running yield from this income was 4%: a yardstick that constantly crops up as a good-average for UK equity higher-paying assemblages at all sizes of capitalisation. On average shares were obtained when yielding one-third more than the All-Share Index. This is in line with my 'optimal zone' happy medium between juicy and injudicious-- though not deliberately so, since this is not a mech portfolio. Eight of 27 buys (whisper it not in Gath) came from the 'warning' or 'danger' zones.

The fruits of TMFpyad's 'market trading', thrown up by corporate shuffles, are another tale entirely. They have vastly safeguarded income:

2012-13: £115
2013-14: £188
2014-15: £315
2015-16: £200
2016-17: £0
2017-18: £2,046

Total to date £2,864, 27% of all receipts. More than two-thirds of the non-regular income was £1,771 in lapsed rights entitlement from Cineworld, as it raised cash to buy America's Regal moviehouse chain. I never exercise rights-- usually good money after bad-- and this windfall was well over a year's worth of routine dividends from the whole portfolio. A freak, maybe, but it sure puts the disappointments in perspective.

There was a further £244 in lapsed rights from Prov. Fin.'s bailout rights call, equating to about two years' worth of its now-suspended dividend. (OK, that's a complacent way of regarding it.)


CAPITAL

To me this is almost as pressing a concern as the next Eurovision Song Contest winner, but what the hell.

At Jul. 12, 2018, LuniHYP250's market value was £37,362, including £85 of unallocated capital. This is 7.8% down on the year, whereas the All-Share Index (FTAS) gained 4.0%; it is the third consecutive (and much the worst) accounting year of underperformance. Last year finished feebly: Inmarsat saw a handsome bid evaporate, while TP ICAP put out a warning and sacked the boss.

Year-end values:

Jul. 2012 (bought): £23,949
Jul. 2013: £30,405, +27.0%, FTAS +19.3%
Jul. 2014: £31,688, +4.2%, FTAS +2.8%
Jul. 2015: £38,353, +21.0%, FTAS +1.9%
Jul. 2016: £36,949, -3.7%, FTAS -0.8%
Jul. 2017: £40,509, +9.6%, FTAS +12.2%
Jul. 2018: £37,362, -7.8%, FTAS +4.0%

In 2012-18 the portfolio has increased by 56% against the FTAS's 45%. The FTSE250 ex Investment Trusts index, a more congruous yardstick, is up 41%; I use the All-Share as a universal comparator for an unconstrained, British small investor. Inflation has been about 16%.

The best overall payback, taking in all receipts plus paper profits, is Cranswick's £3,934. The thinnest is N Brown's £117. The average among 16 survivors from 2012 is £1,065.

No doubt my sloppy attitude to capital changes among portfolio members (albeit full takeovers' proceeds and capital returns are ploughed back into new stocks) is partly to blame for recent underperformance. OTOH I now hold 23 well-differentiated midcaps. None lack hope of producing dividends in the near term. Together they yield well above what a bond or cash deposit offers, with inflation protection from an income reserve.


BALANCE

Has the portfolio become perilously unweighted over time? My test is whether any share furnishes more than twice or less than half what an even split would dictate.

As to regular income, of the 16 survivors among the 20 positions taken in 2012 Balfour Beatty and Chemring-- both cutters, now in early recovery-- provided less than half as much income as the one-sixteenth portion of a perfect balance. No share has paid out more than twice as much. The collection remains broadly spread as regards periodic dividends, its raison d'etre.

The largest regular income among these survivors was paid by Provident Financial despite its present malaise: £510. The least was Chemring's £98.

Capital weights at Jul. 2018 among the 23 present members include two worth less than half the norm, which is 4.4% of total value: N Brown and Provident Financial. One share, Cranswick, accounts for 8.7% of the portfolio, a shade overweight by the 'twice average' test. None of these divergences seem to call for tinkering.


DERISKING

My habit is to set aside part of the raw inflow to preserve the purchasing power of a 'derisked' spendable sum. The surplus goes to an income reserve which will bolster purchasing power when the portfolio collects too little.

Thus LuniHYP250 harvested £1,356, 5.7% of starting capital, in its first year. At the end of it I took 4.5% or £1,078 for spending and reserved the rest, £278. The FTAS yielded 3.3% in Jul. 2013. To begin more than a point higher seemed enough to honour the High in HYP.

In Years 2 and 3 the withdrawn quantum was increased only by inflation-- at 2.6%, then 1.0%-- while further transfers filled the reserve. At the end of Year 3 it already contained 12 months of the spendable allowance. So it felt safe to lift the withdrawal rate, index-linked, from 4.5% to 5.2%, i.e. by 15%. The reserve remained at 12 months at Jul. 2017.

The Cineworld bonus of Feb. 2018 made me again jettison my cautious custom of waiting at least five years betweeri rises in the withdrawal rate. I do not need a reserve of three or four years' current spendable income.

Yet far harder times may lie in wait for us dividend fans. So I will lean to temerity and boost the withdrawal by one-tenth, giving an ongoing 5.69%+RPI on the original investment with a reserve of 24 months at present. Over the first six years, three-tenths of raw income will have been held back: £3,160 out of £10,655.

A stress test, piling on the prophetic agony, imagines inflation at 4% pa in 2018-2022. Meanwhile, what if portfolio income comprises regular items only. Wot, no extras?

Say such regular income dropped by one-tenth in 2018-19 due to a recrudescence of crisis --despite the portfolio's newcomers starting to contribute-- and then increased by only 3% in 2019-22, behind living costs. The reserve would be heavily depleted; however by Jul. 2022 it would contain 10 months' payout after ten years' operation.

A tolerable nadir before recovery, if recovery there is to be. If not, it will be back to bullion, bullets and baked beans.

Breelander
Lemon Quarter
Posts: 2218
Joined: November 4th, 2016, 9:42 pm
Has thanked: 277 times
Been thanked: 522 times

Re: LuniHYP250: Year 6 review

#152244

Postby Breelander » July 13th, 2018, 7:11 pm

Luniversal wrote:Here is reviewed the latest year of what began as a 20-share 'Midcaps HYP' on The Motley Fool...


Welcome back.

Here is where it began...
https://web.archive.org/web/20120820130 ... 96939.aspx

Gadge
2 Lemon pips
Posts: 240
Joined: November 4th, 2016, 10:31 pm
Has thanked: 7 times
Been thanked: 58 times

Re: LuniHYP250: Year 6 review

#152248

Postby Gadge » July 13th, 2018, 7:36 pm

Good to see it make it to year 6 and hopefully.to it's first decade all in good time.
Looks like it has been eventful as perhaps one may expect from these smaller companies but a good result on capital for sure.
Nice to see all your great earlier work not going to waste after all. Saw your earlier update on baskets. Welcome back.

Urbandreamer
Lemon Slice
Posts: 446
Joined: December 7th, 2016, 9:09 pm
Has thanked: 20 times
Been thanked: 81 times

Re: LuniHYP250: Year 6 review

#152282

Postby Urbandreamer » July 14th, 2018, 7:30 am

Many, many thanks Luni.

It's not how I roll, but I have missed your baskets and contributions.

Arborbridge
Lemon Quarter
Posts: 2194
Joined: November 4th, 2016, 9:33 am
Has thanked: 297 times
Been thanked: 527 times

Re: LuniHYP250: Year 6 review

#152283

Postby Arborbridge » July 14th, 2018, 7:42 am

I'm so glad you have reported back, and hope you will continue to keep us in touch with developments.

You have been missed!

Arb.

Raptor
Lemon Quarter
Posts: 1520
Joined: November 4th, 2016, 1:39 pm
Has thanked: 108 times
Been thanked: 239 times

Re: LuniHYP250: Year 6 review

#152287

Postby Raptor » July 14th, 2018, 8:29 am

Luniversal wrote:Here is reviewed the latest year of what began as a 20-share 'Midcaps HYP' on The Motley Fool. It is now called LuniHYP250, since it consists of FTSE 250 companies, although none was valued at less than £500m on purchase. Choices were on standard 'pyadic' tests, e.g. dividend history, gearing, sectoral separation. No tinkering, no capital added since it was bought on Jul. 12, 2012.

..............

LuniHYP250's average running yield from this income was 4%: a yardstick that constantly crops up as a good-average for UK equity higher-paying assemblages at all sizes of capitalisation. On average shares were obtained when yielding one-third more than the All-Share Index. This is in line with my 'optimal zone' happy medium between juicy and injudicious-- though not deliberately so, since this is not a mech portfolio. Eight of 27 buys (whisper it not in Gath) came from the 'warning' or 'danger' zones.



Good to see you post again. Much missed.

Just a note going forward, now that you have changed to the FTSE250 companies, should you look at the yield being based on the FTSE All-Share and move to the FTSE250? I have recently changed mine after noticing that since I have "culled" my HYP in recent years it now consists of only FTSE250 companies.

Raptor.

Luniversal
Posts: 15
Joined: November 4th, 2016, 11:01 am
Been thanked: 134 times

Re: LuniHYP250: Year 6 review

#152321

Postby Luniversal » July 14th, 2018, 1:12 pm

Raptor- No change in m.o.: all picks were from the upper reaches of the FTSE250, though I don't chuck them out if they later shrink or grow.

It never occurred to me to select with reference to the midcaps index yield, though I may begin to do so if I can unearth it. A bit bigger than the All-Share's yield IIRC.

Finding midcaps is tough when you're up to 23 sectors. Might have to admit tiddlers.

BrummieDave
Lemon Slice
Posts: 373
Joined: November 6th, 2016, 7:29 pm
Has thanked: 60 times
Been thanked: 118 times

Re: LuniHYP250: Year 6 review

#152350

Postby BrummieDave » July 14th, 2018, 6:14 pm

Is it possible to show how an off the shelf investment product with the closest mandate would have performed, perhaps iUKD (fully recognising that it selects from the FTSE 350 which contains the 100 as well as the midcaps in this HYP)?

I'm always keen to know how these targeted ETFs compare to the specific objectives of an HYP.

monabri
Lemon Quarter
Posts: 1971
Joined: January 7th, 2017, 9:56 am
Has thanked: 181 times
Been thanked: 453 times

Re: LuniHYP250: Year 6 review

#152366

Postby monabri » July 14th, 2018, 7:38 pm

BrummieDave wrote:Is it possible to show how an off the shelf investment product with the closest mandate would have performed, perhaps iUKD (fully recognising that it selects from the FTSE 350 which contains the 100 as well as the midcaps in this HYP)?

I'm always keen to know how these targeted ETFs compare to the specific objectives of an HYP.


Over 5 years IUKD reports that the total return has been 39.57% (and over 10 years 91.32%).

"Total Return (%) - Total return is expressed as the percentage change of an investment over a certain timeframe. It includes the net income earned by the investment in terms of dividends or interest along with any change in the capital value of the investment - as of 30/Jun/2018".

https://www.ishares.com/uk/individual/e ... -ucits-etf


Luni calculated the capital value had increased by 56% over 6 years. Then there are the divis to factor in addition (£7791). So we have approx 89% total return. (please check my calcs...I included the "spare cash" in the calc).

Luniversal
Posts: 15
Joined: November 4th, 2016, 11:01 am
Been thanked: 134 times

Re: LuniHYP250: Year 6 review

#152372

Postby Luniversal » July 14th, 2018, 9:15 pm

BrummieDave wrote:Is it possible to show how an off the shelf investment product with the closest mandate would have performed, perhaps iUKD (fully recognising that it selects from the FTSE 350 which contains the 100 as well as the midcaps in this HYP)?

I'm always keen to know how these targeted ETFs compare to the specific objectives of an HYP.


IUKD, which I have held since 2006, is up 31% during the life of the midcaps portfolio: about twice inflation but behind indices. It has lagged the All-Share in 13 out of 24 quarters.

More to my purpose, distributions-- which are very up and down-- would have been about £9,100. Because of their volatility derisking would have curbed the protected withdrawal rate to nearer 5%+RPI than the portfolio's 5.7% using the same 24-month income reserve. But 5.7% could be drawn if the reserve were let fall to 13 months, which would suffice for some.

I doubt iShares's stockpicking process. Anyway no secret-sauce 'product' offers the steadiness of income in a HYP with a buffer or an investment trust basket. Household bills do not fluctuate the way open-ended funds' payouts perforce do.

BrummieDave
Lemon Slice
Posts: 373
Joined: November 6th, 2016, 7:29 pm
Has thanked: 60 times
Been thanked: 118 times

Re: LuniHYP250: Year 6 review

#152378

Postby BrummieDave » July 14th, 2018, 10:44 pm

Thanks both, L'Uni and Monabri, for the responses, and to the Mods who I thought may have otherwise bounced me for veering OT!

I'm still learning so your willingness to answer my questions so openly is appreciated.

I don't hold iUKD but do have an extended, more Global, IT basket which started life as B7a just over three years ago. Hope that IT reference doesn't get me 'modded' off the thread! :)

Raptor
Lemon Quarter
Posts: 1520
Joined: November 4th, 2016, 1:39 pm
Has thanked: 108 times
Been thanked: 239 times

Re: LuniHYP250: Year 6 review

#152402

Postby Raptor » July 15th, 2018, 9:28 am

Luniversal wrote:Raptor- No change in m.o.: all picks were from the upper reaches of the FTSE250, though I don't chuck them out if they later shrink or grow.

It never occurred to me to select with reference to the midcaps index yield, though I may begin to do so if I can unearth it. A bit bigger than the All-Share's yield IIRC.

Finding midcaps is tough when you're up to 23 sectors. Might have to admit tiddlers.


The FTSE250 Yield I use is from here https://markets.ft.com/data/indices/tea ... =mcx.d:FSI currently 2.72%

The FTSE All Shares I used to use was https://markets.ft.com/data/indices/tea ... =asx.d:FSI currently 3.63%.

Got these from a thread on TMF but not sure where or if it can be viewed now.

Raptor.

pyad
2 Lemon pips
Posts: 194
Joined: November 4th, 2016, 10:17 am
Been thanked: 292 times

Re: LuniHYP250: Year 6 review

#152410

Postby pyad » July 15th, 2018, 10:28 am

...HYPs are about income. This concept stemmed from hopes that periodic income would rise faster, if more bumpily, than in my Footsie HYPs. Wrong!...

Quite. When I set up the HYP concept on the Fool back in 2000 I suspected strongly from my not unshort experience that in general, big cap dividends over long time periods were likely more dependable than those from smaller caps. So I've always advocated sticking wholly to the 100 index at selection, or almost wholly so.

So it's an interesting experiment you have but although it's not conclusive, it does look like it supports my view.

BrummieDave
Lemon Slice
Posts: 373
Joined: November 6th, 2016, 7:29 pm
Has thanked: 60 times
Been thanked: 118 times

Re: LuniHYP250: Year 6 review

#152415

Postby BrummieDave » July 15th, 2018, 11:20 am

Wow!

So is that it, distilled into a short series of posts from two widely respected contributors to TMF and latterly LF; if you're seeking long term, growing income, focus on the FTSE 100 and build a HYP (if you're that way inclined) or a basket of ITs like B7a (if you're not)...?

Is that the answer? :)

Luniversal
Posts: 15
Joined: November 4th, 2016, 11:01 am
Been thanked: 134 times

Re: LuniHYP250: Year 6 review

#152533

Postby Luniversal » July 15th, 2018, 7:29 pm

pyad wrote:[i]I've always advocated sticking wholly to the 100 index at selection, or almost wholly so.

So it's an interesting experiment you have but although it's not conclusive, it does look like it supports my view.


I hope soon to report on my all-Footsie HYP, whose seventh birthday is on Wednesday.

Mentallurgist
Posts: 17
Joined: November 5th, 2016, 10:30 am
Has thanked: 12 times
Been thanked: 11 times

Re: LuniHYP250: Year 6 review

#152539

Postby Mentallurgist » July 15th, 2018, 8:08 pm

Hi Luni,

I''m a long time lurker and occasional poster. Since you've been gone, I've really, really missed your week ahead posts - it was a bit of a Friday favourite. I have used Sharecast for the last year or so - they have a similar post but they have morphed into WebFinancial which is a dog of a webpage.

Could I ask where you got your week ahead data from ?

Regards

A.

Luniversal
Posts: 15
Joined: November 4th, 2016, 11:01 am
Been thanked: 134 times

Re: LuniHYP250: Year 6 review

#152543

Postby Luniversal » July 15th, 2018, 8:28 pm

Mentallurgist wrote:Could I ask where you got your week ahead data from ?


Mostly from the horse's mouth- companies' websites.

I found other sources patchy. The Chronic Investor was best.

Mentallurgist
Posts: 17
Joined: November 5th, 2016, 10:30 am
Has thanked: 12 times
Been thanked: 11 times

Re: LuniHYP250: Year 6 review

#152546

Postby Mentallurgist » July 15th, 2018, 8:53 pm

Luniversal wrote:
Mentallurgist wrote:Could I ask where you got your week ahead data from ?


Mostly from the horse's mouth- companies' websites.

I found other sources patchy. The Chronic Investor was best.



Much appreciated - cheers A.

idpickering
Lemon Quarter
Posts: 3327
Joined: November 4th, 2016, 5:04 pm
Has thanked: 442 times
Been thanked: 807 times

Re: LuniHYP250: Year 6 review

#152579

Postby idpickering » July 16th, 2018, 6:06 am

Luniversal wrote:
I hope soon to report on my all-Footsie HYP, whose seventh birthday is on Wednesday.


I look forward to that. Good to see you about. You have been missed.

Ian.

BrummieDave
Lemon Slice
Posts: 373
Joined: November 6th, 2016, 7:29 pm
Has thanked: 60 times
Been thanked: 118 times

Re: LuniHYP250: Year 6 review

#152656

Postby BrummieDave » July 16th, 2018, 12:33 pm

idpickering wrote:
Luniversal wrote:
I hope soon to report on my all-Footsie HYP, whose seventh birthday is on Wednesday.


I look forward to that. Good to see you about. You have been missed.

Ian.


And indeed I do too.

BTW I do hope nobody thought my 'Wow!' comment earlier in this thread was in any way sarcastic as indeed it could have been interpreted. It was a genuine exclamation of excitement that we may have seen consensus between L'Uni and PYAD that the dividend bearing stocks of the FTSE 100 provide the common hunting ground for LTBH HYPers and IT portfolio builders alike. Neither has responded either positively or negatively to that suggested conclusion, or indeed has anyone else, but perhaps further evidence to draw from will be forthcoming with the 'all-Footsie HYP' update.


Return to “High Yield Portfolios (HYP) - Practical”

Who is online

Users browsing this forum: guaitai and 3 guests