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Beginners HYP 2019 Review and Next Purchase

Practical discussions about equity High-Yield Portfolios (HYP) for income
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Tight HYP discussions only please - OT please discuss in strategies
TopOfDaMornin
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Beginners HYP 2019 Review and Next Purchase

#215521

Postby TopOfDaMornin » April 16th, 2019, 10:17 pm

Last years review can be found at: viewtopic.php?f=15&t=11402&hilit=beginners+hyp+2018

No monies have yet been withdrawn.

The portfolio has £ £12,845 to invest in new shares. This is made up of £2,845 dividend currently in the HYP account and a further annual addition of £10,000.

Comments welcome on the next purchases and the progress of the HYP.

Performance


By Share

Median share value = £6,421

By Sector

Median sector value £7,759
Median sector dividend £404

Forecast vs Actual


Top 10 Next Top Ups as Defined by HYPTUS

idpickering
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Re: Beginners HYP 2019 Review and Next Purchase

#215548

Postby idpickering » April 17th, 2019, 6:14 am

A very nice looking HYP, and superbly reported, thank you. In your shoes, I'd top up IMB.

Ian.

IanTHughes
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Re: Beginners HYP 2019 Review and Next Purchase

#215575

Postby IanTHughes » April 17th, 2019, 9:10 am

I am not sure that you need any advice but, for what it is worth, I agree with idpickering. I can see no reason to look further than Imperial Brands (IMB) for the next top-up.

Do let us know what is decided upon


Ian

Arborbridge
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Re: Beginners HYP 2019 Review and Next Purchase

#215577

Postby Arborbridge » April 17th, 2019, 9:15 am

As regards a top-up, you may as well go with IMB. It's top of the table, and there's nothing against it. You are in a rather fortunate position in that the top share is a rather decent one and not a dodgy duck as often happens.

Arb.

monabri
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Re: Beginners HYP 2019 Review and Next Purchase

#215585

Postby monabri » April 17th, 2019, 9:35 am

I'd concur with the IMB top up but what else?

"TopOfDaMornin" said

"The portfolio has £12,845 to invest in new shares. This is made up of £2,845 dividend currently in the HYP account and a further annual addition of £10,000."

So, we are looking ar several top ups and/ or new buys! I'd be tempted to add "half shares" in both WPP and ITV ( media) and half shares in Direct Line Group & Admiral in " non life insurance "

teecee90
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Re: Beginners HYP 2019 Review and Next Purchase

#215589

Postby teecee90 » April 17th, 2019, 9:45 am

With the amount you have to invest I assume that you are looking to top-up or add more than one holding. I would avoid financials as they already represent a significant proportion of your portfolio. On that basis, I would probably stick to your top 3 and possibly Marstons. Not keen on SSE at the moment until we get some clarity on their forward plans.

idpickering
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Re: Beginners HYP 2019 Review and Next Purchase

#215590

Postby idpickering » April 17th, 2019, 9:46 am

The miners are on offer today if that suits? BHP down 3%, and RIO down 3.5% as I type.

Ian.

blobby
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Re: Beginners HYP 2019 Review and Next Purchase

#215597

Postby blobby » April 17th, 2019, 10:06 am

Thanks for posting this TopOfDaMornin.

I don’t follow IMB so I can’t comment on that. Second on your HYPTUS list is RMG and having invested myself recently I’m still keen on this and considering more. I’m nervously holding on to VOD and I like Marston’s. I hold RSA but I don’t believe the yield figure of 5.3%. RSA is on a historic yield of 3.9% and I’ll be happy if we get 4.4% this year.

How about a new share of IG Group (IGG). This is my one take away from the new PYAD portfolio (7.6% yield).

MDW1954
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Re: Beginners HYP 2019 Review and Next Purchase

#215717

Postby MDW1954 » April 17th, 2019, 5:57 pm

BBOX, ESP and PHP from me -- all REITs, with either zero or only secondary exposure to retail. Yields 4.5%, 5.4% and 4.1% respectively.

MDW1954

Gengulphus
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Re: Beginners HYP 2019 Review and Next Purchase

#215750

Postby Gengulphus » April 17th, 2019, 8:08 pm

To get some minor presentation points out of the way first - please don't take any but the first of them as criticism, more as suggestions of things you might like to upgrade in future reviews, and even the first is only a pretty minor criticism and mainly such a suggestion:

* It messes up various calculations a bit to include a share you no longer hold (the taken-over SKY) in the list of shareholdings. In particular, the median holding value you give is £6,421, which is the value of the 17th highest-value holding (BAE Systems) of the 33 holdings you list. But you actually only have 32 holdings, so the median should be the average of the values of the 16th and 17th highest value holdings (AstraZeneca and BAE Systems). As it happens, that average is £6,429 (well, £6,428.50, but I've rounded to whole pounds - such a calculated figure cannot be any more accurate than the inputs to its calculation), so it makes very little difference in this case - I would probably never have noticed it if I hadn't decided to count how many holdings the portfolio contained and happened to notice the Sky value of £0 as I went down the list. But it could make a more substantial difference if a portfolio experiences a burst of takeovers such as the one HYP1 encountered in 2008, with 19% (3 out of 16) of its holdings taken over during the year. (By the way, the average holding value is the holdings value £207,605 (= portfolio value £210,450 - cash £2,845) divided by the holdings count (32), giving £6,488. So (as often happens) there's little difference between what the median tells one and what the average tells one.)

The way I think it would be better done is to omit the Sky holding, removing the £83 dividends from the total, which would therefore be £9,840, and add a sentence after the table, saying "The portfolio also received £83 dividends during the year from its holding in Sky, which has now been taken over, making a total of £9,923 dividends received in the year."

* "Div%" is a rather ambiguous heading - does it mean yield (dividends from holding as a percentage of capital value of holding) or dividend weighting (dividends from holding as a percentage of total dividends from the whole portfolio)? I did work out that it was dividend weighting, but it did need a bit of working out! And a Forward Yield column could usefully be added to the holdings table - it's available from the table of the top ten HYPTUSS top-ups, but only for those 10 holdings and not the other 22.

* A capital weighting column might usefully be added to both the list of shareholdings and the list of sectors - especially the latter, because the top-up ranking produced by HYPTUSS only takes sector weightings into account and it can be worth watching out for sector weightings become unbalanced. Or indeed, the weightings of groups of related sectors might also be an issue - your HYP is very much in borderline territory from my point of view with its total of £41,165 capital value in the financial sectors (banks, life insurance, nonlife insurance and financial services) and £1,916 dividends from them, making up 19.8% and 19.3% respectively of the portfolio totals of £207,605 capital value and £9,923 dividends.

I'll also point out that BHP Billiton has been renamed BHP Group and been given a new EPIC, namely BHP. There's a danger that you're picking up an old price and other fundamentals for your holding if the spreadsheet you're using is using BLT to try to get them.

On to the main question. First, I completely agree with what others have said about splitting the £12,845 available across more than one purchase - spending roughly twice the median (or average) holding value on a single purchase is a recipe for an unbalanced portfolio. I would probably be thinking in round-number terms of five £2.5k top-ups, or possibly four £3k top-ups or even three £4k top-ups if it proves difficult to find enough good top-up candidates. I wouldn't be thinking in terms of two £6k purchases unless they were both new holdings, as a £6k top-up would push even your lowest value holding (IMB at £3,710) all the way up to being the highest value holding - rather too big a jump IMHO!

There is the point that a small top-up might only take the share a few places down in your top-up order, not enough to mean that the remaining small top-ups were all below it as choices - or in other words, if you were to select the top-ups one at a time, buying each before making the next selection, it would get selected more than once. I'm doubtful that would happen for Imperial Brands in your case, but certainly don't know it wouldn't. It wouldn't be too harmful if you did actually do it that way and find that Imperial Brands was selected twice - it would just mean that you paid one extra buying commission than you would if you'd known to buy a double-size top-up in the first place. But if you want to, you can select the first top-up, update the spreadsheet with the estimated number of shares you'll get, estimating that number as the amount you're spending on the top-up (or if you're a stickler for making the estimate as close as you possibly can, that amount minus a commission, then divided by 1.005 to take stamp duty into account) divided by the share price. Then repeat that for the second top-up, the third, etc, until you've selected them all. Having got them all, then do one buy for each share selected for the total amount you want to spend on it. So if you were doing five £2.5k top-ups and IMB was selected twice while three other shares were selected one each, for example, do a £5k purchase of IMB and a £2.5k purchase of each of the others. Remember to undo all the purchases of estimated numbers of shares before entering the real details, though! (Or it might be safer to make a copy of your spreadsheet, do all the purchases of estimated numbers of shares in it, then discard that copy before entering the details of the actual purchases in the original spreadsheet.) That technique can also be used for a larger number than you would normally decide on of smaller top-ups, e.g. eight £1.6k top-ups, which I would guess would very likely end up indicating at least one double-size £3.2k top-up, and possibly even a triple-size £4.8k top-up.

Secondly, two new holdings might be a possibility, and so might one new holding at £6k and two £3k top-ups. But with 32 holdings in 24 sectors, I think the need to diversify your HYP further has more-or-less vanished. IMHO that doesn't rule out adding new holdings, but it does say that the added diversification should not be regarded as a reason for adding them. Without any added-diversification benefit and with a small extra-admin cost, I reckon new holdings need to be pretty outstanding HYP candidates to be worth adding. And while I consider both of the new holding candidates that I've thought of so far (Rio Tinto and Greene King) to be good HYP candidates, subject to 'due diligence' I haven't done for this post, I'm doubtful that that my 'due diligence' would conclude that they're sufficiently outstanding. So think of them as at most 'not particularly likely, but you might like them enough' suggestions...

Thirdly, like other posters I think the choice of Imperial Brands for the first top-up is very clear - the only caveat in that is that I basically don't invest in tobacco companies myself and so don't keep an especially vigilant eye on them! After that, it becomes a lot less clear... In your top 10 HYPTUSS top-ups, Royal Mail, SSE, United Utilities and BT all strike me as being at some risk from Labour's nationalisation threats, as are National Grid and Severn Trent. Together, those holdings account have a 16.2% of capital value weighting and a 17.7% dividend weighting in the portfolio. While I think having some of the portfolio at risk to that threat is basically unavoidable for a HYP, I wouldn't be very happy increasing the proportion all that much above those percentages and would prefer to let it dwindle a bit. Similarly, Aviva, RSA and HSBC are financials, and as mentioned above I think financials are about as highly weighted as a group as I would like. That leaves Vodafone and Marston's in the top 10, and I don't consider either of them all that good a candidate: Vodafone has distinct queries about its cash flow and debt in my mind, especially as the debt has been increasing, while Marston's is clearly worried about its debt and have said in their trading statement a few months ago that they're concentrating their cash flow on reducing their debt - only to the point of holding the dividend so far, not cutting it, but it certainly raises the risk that they'll decide more is needed. It's the right thing for them to do IMHO, but it's not the best of signs in a share.

I should emphasise that I'm not saying all of those shares are bad choices, just that they all have things about them that make them considerably less clear than Imperial Brands to my mind. I might well end up buying one or more of them myself, but I would want to put some serious thought into what risks I'd be least unhappy about accepting... A common situation with HYP purchases in my experience, by the way - I seldom see more than a few shares I'd be completely happy to hold in a HYP.

I can't look at the remaining roughly 2/3rds of the HYPTUSS top-up order, but a quick skim through the other 32 shares in your portfolio says that GlaxoSmithKline and DS Smith are probably the first two I would look at among them.

So no firm conclusions about what I think your purchases should be, beyond that I think they should very likely include Imperial Brands.

Gengulphus

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Re: Beginners HYP 2019 Review and Next Purchase

#216178

Postby monabri » April 19th, 2019, 11:40 am

TopOfDaMornin wrote:No monies have yet been withdrawn....

The portfolio has £ £12,845 to invest in new shares. This is made up of £2,845 dividend currently in the HYP account and a further annual addition of £10,000.

Performance


L=[/table]


Thanks for the update - could I seek some clarification on the second row: "Total Invested £ " .

Possibly you explained this on the original TMF updates (many years ago...) but it looks like you're taking the dividends received and then topping it up to a round number (£7000/ £10000) with new money?

It was the statement above, copied below(see text in bold) which made me "ponder"!

"The portfolio has £ £12,845 to invest in new shares. This is made up of £2,845 dividend currently in the HYP account and a further annual addition of £10,000.

I thought that you were adding an annual addition of £10k on top of the dividend but that cannot be the case (otherwise the total investment would be ~£175k).

I can see how you get to a £127k figure - if you added "top up" sums of new monies to the previous years divis.




As I mentioned, you probably explained this in you original update in days of TMF!

Gengulphus
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Re: Beginners HYP 2019 Review and Next Purchase

#216187

Postby Gengulphus » April 19th, 2019, 12:25 pm

monabri wrote:Thanks for the update - could I seek some clarification on the second row: "Total Invested £ " .

Possibly you explained this on the original TMF updates (many years ago...) but it looks like you're taking the dividends received and then topping it up to a round number (£7000/ £10000) with new money?

It was the statement above, copied below(see text in bold) which made me "ponder"!

"The portfolio has £ £12,845 to invest in new shares. This is made up of £2,845 dividend currently in the HYP account and a further annual addition of £10,000.

I thought that you were adding an annual addition of £10k on top of the dividend but that cannot be the case (otherwise the total investment would be ~£175k).

I think the "Total invested £" row is fairly clearly the total invested into the portfolio as a whole - i.e. only new subscriptions to the portfolio included. You seem to be reading it as the total invested in shares by the portfolio - i.e. new subscriptions + reinvested dividends + reinvested corporate action proceeds - and possibly ignoring the last part of that sum!

The reason I believe that's fairly clear is that each entry in the row, apart from the rightmost, is the entry to its right (the previous year's value) plus the value above it ("Previous Year Investment £"), which seems to me to be intended to mean the new money invested into the portfolio during the year (or sometimes 11 or 13 months) that have passed since the column to its right, especially given the "further annual addition of £10,000" comment (which is presumably the current rate of additions for Jun-14 and before, given the £7,000 entries under Jun-14, May-13 and Jun-12).

That does imply that there are columns not shown to the right of the table - at a guess, eight of them with £7,000 per year subscribed. But that's pretty clear anyway: a portfolio current value of £72,269 from a single subscription of £7,000 is not a complete stockmarket impossibility, but it is pretty unlikely even with strategies that aim for it at huge risk of actually taking big losses, and virtually impossible with a HYP strategy!

Gengulphus

monabri
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Re: Beginners HYP 2019 Review and Next Purchase

#216198

Postby monabri » April 19th, 2019, 1:18 pm

I wasn't sure, hence the question. TopOfDaMornin said;

"This is made up of £2,845 dividend currently in the HYP account and a further annual addition of £10,000."

I read this to be existing divis accumulated in the HYP plus new money to the tune of £10k.


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