Arb's HYP 10th year

Practical discussions about equity High-Yield Portfolios (HYP) for income
Arborbridge
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Arb's HYP 10th year

Postby Arborbridge » January 7th, 2017, 7:36 pm

Really? My goodness, how ten years has slipped by - that is pretty scary when you look at average life expectancy and compare with my age. Technically, I'm in the end game.

However:
Income:
2016 was a successful year in that my income from investments exceeded my "salary" by a good margin - by a factor of x1.75.
Income per unit increased by 4.50%
Yield on the HYP was 4.41% (total income/year end value).

In view of the recent discussion about calculating income per unit according to the number of units on the day of receipt, I recalculated the income per unit for 2015 and 2016 which gives the 4.5% increase. Income per unit using this method is 6.5 pence - virtually the 6.57p predicted by the HYPTUSS at the beginning of 2016.
Capital:
Capital price was almost static at 140.4 per unit (2015= 139.19). Quite why this performance is below most other HYPs reported, I cannot say, other than the obvious: I picked some shares which "dogged" this year.

Dealing charges:
This year total 0.15% (2015 0.13%). Comprising: dealing charges 0.12% and management charges 0.03%
Costs as a percentage of income drawn: 3.53% (2015: 2.84%) I've rather gone backwards on stacking up charges. This is self-inflicted owing to some re-arrangement of holdings in order to cut down effort. That is, I've amalgamated two holdings into one in some cases, running up admin costs. Also increased owing to a bout of re-investment.
Tinkering:
Amlin: taken over
Rexam: taken over
GSK: trimmed to size
No other sales apart from neutral re-organisations.

New investment into the HYP was around 10%, from reinvestment, but mostly by releasing capital from other investments which were not providing an income.
Forecast:
A snapshot with HYPTUSS made on December 1st suggests an income of 6.8p/unit, a increase of around 5%. This seems generous, but the forecast is usually somewhere near correct, so here's hoping I won't need to deploy that IR! At this, the yield would be 4.8%
Conclusion:
HYP continues to do what it said on the tin. I'm just a tad dicouraged that my capital increase has been non-existent in a good year, though I notice my IT basket did not do any better, surprisngly. HYPs are like yachts: you are perfectly happy with the performance of yours, until another boat comes gliding past you :)

I will post my portfolio separately.

Itsallaguess
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Re: Arb's HYP 10th year

Postby Itsallaguess » January 7th, 2017, 7:51 pm

Arborbridge wrote:
Income per unit using this method is 6.5 pence - virtually the 6.57p predicted by the HYPTUSS at the beginning of 2016.


Thanks for continuing to include this metric in your reviews Arb.

As we've discussed before over the years, whilst the HYPTUSS (Digital Look) Forecast Yields may have a margin of error on a per-share basis, I continue to see a tight correlation on a HYP portfolio basis similar to your own, which makes the continued use of such forecasts a really useful thing for me to be able to measure.

Had to laugh at the yachts comment, so thanks for that too.... :O)

Cheers,

Itsallaguess

staffordian
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Re: Arb's HYP 10th year

Postby staffordian » January 7th, 2017, 8:25 pm

Hi Arb, I think your comment about calculating unit values on the day of receipt again raises an interesting point.

I did this with my previous HYP but when I started to rebuild mine in 2013 I decided to simplify things a little. Purists will probably be horrified, but I chose to revalue on a monthly basis, specifically on the last day of each month.

I have a worksheet attached to my HYPTUSS to deal with it, and each month I simply need to enter cash in or out during the month, total dividends earned that month, total dividends reinvested that month (ie not withdrawn from the portfolio, not necessarily actually used to make a purchase that month), and portfolio value. Two minutes a month max. I then also enter the value for the FTSE350TR index which the spreadsheet then compares with the accumulation unit value.

I sometimes wonder how much difference my approach makes compared to revaluing for each transaction, but as I see it, the whole thing is arbitrary anyway; why is "on the day" correct? Why is the closing figure for a particular day any more correct than a figure during the day?

As I see it the key thing is consistency, though having said that, I do realise my approach means it's probably not consistent (and therefore not directly comparable with) the numbers given by others here.

I wonder if a spreadsheet with guidelines should be uploaded to the Weebly site for HYPers to use, to ensure compatibility between unit values quoted here?

Arborbridge
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Re: Arb's HYP 10th year

Postby Arborbridge » January 7th, 2017, 9:01 pm

, but as I see it, the whole thing is arbitrary anyway; why is "on the day" correct? Why is the closing figure for a particular day any more correct than a figure during the day?


Staffordian, I do rather agree with you, and I mentioned in another thread that it is rather like "what type of yield are you measuring"? In ant case, why measure on the day with the latest creation of units, when those units have not contributed to the dividend, and will not possibly for months?

I usually work out the income on a quarterly basis, but with the number of units which existed three months prior.
Interestingly, for the two years I've done so far using the "on the day" method, the two sets of results are quite close enough for my purposes. As regards the "on the day" method, it isn't that dramatically different to the monthly method because my number of units does not vary too much in any month - it's usual constant. Using speedfill in the spreadsheet, it's easy.

I agree that consistency is the thing, and some notes put together outlining an agreed method would certainly be useful. But you know what they say about herding cats... :lol:

Arborbridge
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Re: Arb's HYP 10th year

Postby Arborbridge » January 7th, 2017, 10:40 pm

Here is the whole 38 share HYP, listed in current value order. The Ov/under Median column is simply relative to the median, where the median = 1.00. In terms of sector weighting, I do not make a meal of it, but just keep an eye to make sure the weightings are not excessive. At present, life insurance is the biggest weight, 7.9%, financial services 7.00 and similar for tobacco. HYPTUSS currently suggests a forward yield of 4.86%. Income % is not yield, but the percentage of income contribution from that particular share. I prefer to keep this under 4% but occasionally it will go above - 5% being the limit. Similar limits are applies to capital invested, the final column - this prevents my enthusiasm for one share running away with me.


Arborbridge
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Re: Arb's HYP 10th year

Postby Arborbridge » January 7th, 2017, 11:12 pm

Appendix:

Income/capital ratio. This is an interesting snapshot, interesting, but possibly meaningless. Dividing the income produced by capital cost shows which shares are efficiently deploying my capital at this moment. The share at the bottom, for example, give me no income for a large capital input. The most efficient in this respect has been Interserve followed by Admiral. I reflect on the fact that without following these boards I would never have notice Interserve, nor would I have decided to buy Tesco: together the best and the worst!
The final column I give for perspective, is the XIRR of each share. PNN is not given at it was purchased too recently.
I'm not sure any general conclusion can be drawn from comparison between the two columns, but it's noticeable that Reckitt is a notable example where a high XIRR is accompanied by a sub-"1" income ratio, UBM also.

Dod1010
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Re: Arb's HYP 10th year

Postby Dod1010 » January 8th, 2017, 8:22 am

Arb

Thanks for that mass of info. I do not have time to study it at the moment but your overall result is just the opposite of mine. My XIRR across the portfolio was about 8% (I hold no miners) but my income was up by only about 3%. My yield on year end values was 4.8%. Phoenix and British Land were both down around 20% but I had very good gains from the likes of Shell and HSBC inter alia, and of course I include some ITs. Murray Int was up 43%. Many of my shares were in the neutral range. This is off topic.

I need to look carefully at my income because although it was perfectly adequate, there was only a modest increase, but I had no 'recovery' stocks and the only drop in income was Cobham which I sold towards the year end and bought Primary Health Properties. As long as my income holds up at current levels I will be perfectly content. You mentioned Amlin in making a comparison with 2015. I think that may be the key to my outcome. I had a biggish holding (You may recall that I used to sing its praises) and it had a big Special in early 2015 which of course has not been repeated.

Thanks again.

Dod

Arborbridge
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Re: Arb's HYP 10th year

Postby Arborbridge » January 8th, 2017, 9:17 am

My XIRR across the portfolio was about 8% (


Was that on a one year basis? I don't have a one year figure to hand, but it must have been worse, but more balanced towards income than capital. You've reminded me that I intended to show some XIRRs for the shares, but I haven't updated the capital values to Dec 31st yet (XIRR is in a separate spread sheet). However, the HYP XIRR from Jan 2010 is 9.94%

I should also have mentioned under "tinkering" that I bought a new holding: Pennon.

I bought Phoenix for my wife's HYP, which is why it promptly fell. :)

I don't like to mix ITs in my HYP, just for clarity. I have a separate IT basket, which is doing very well. I bought MYI in tranches and it has increased to the extent of being one of the biggest holdings - though it looked gloomy until last year! When I can pull some figures together, I may write that up on the appropriate board.

Thanks for responding.

Raptor
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Re: Arb's HYP 10th year

Postby Raptor » January 8th, 2017, 9:39 am

Arborbridge wrote:I don't like to mix ITs in my HYP, just for clarity. I have a separate IT basket, which is doing very well. I bought MYI in tranches and it has increased to the extent of being one of the biggest holdings - though it looked gloomy until last year! When I can pull some figures together, I may write that up on the appropriate board.

Thanks for responding.


Would be appreciated as my "bunch" of IT's seems to be flying on a capital point but static on the income so seeing another person's over the year would be an insight.

Thanks for the above, I always appreciate seeing portfolio stats even if mine is Tax year aligned, for no reason other than history when I used to get oodles of share options which I needed to let the HMRC know about.

Will put a link from the portfolio board...

Raptor.

idpickering
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Re: Arb's HYP 10th year

Postby idpickering » January 8th, 2017, 9:44 am

Hi Arb,

Thanks for posting your in depth details of your HYP. Very interesting. I'm still interested in bringing Admiral on board perhaps. We'll see. Have another. Virtual rec sir.

Regards

Ian.

Arborbridge
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Re: Arb's HYP 10th year

Postby Arborbridge » January 8th, 2017, 10:31 am

At the risk of being greedy on space, here are the XIRRs for each share in descending order. It could be worse: nice to see only four in negative territory and all bar a handful giving above RPI returns. It's fascinating to watch shares bounce up and down this table as they come in and out of favour - but that is a whole separate post.



I haven't included Pennon or Schroders XIRRs because they are too recent to show sensible numbers. The Median value across all shares is now 9.6%.
I was interested to notice that when I last update these values, on Oct 31st, many shares were actually high than at the year end - so this confirms suggestions that the "Santa Rally" was from risk off to risk on. The FTSE increased around 2%, whereas my HYP decreased 1%, no doubt because it is reasonably balanced across sectors. Eighteen shares increased in value, from 38. These include some shares which have struggled this year such as Shell, IGG, IRV, MKS,etc showing the "risk on" move of the market - or just relief at matters not being so bad as was thought.

Arb.

Arborbridge
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Re: Arb's HYP 10th year

Postby Arborbridge » January 8th, 2017, 10:38 am

Ian,
I'm still interested in bringing Admiral on board perhaps.]


You might be even more convinced now as it is number two in this table. Looking at my records, it has always bounced around in the top quarter on this measure. Given that it also has a good yield, it is one I have no regret at buying.

Arb.

grimer
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Re: Arb's HYP 10th year

Postby grimer » January 8th, 2017, 12:02 pm

Thanks for taking the time to compile the report. My capital values have increased quite a bit this year, but I have also increased my accumulation units by 42% which I think may account for a large proportion of that growth - i.e. post Brexit purchases and top-ups that have seen some decent gains (KIE, BDEV and LGEN).

It's good to see that your HYP is working and providing the income you need. It is reassuring to know that I might be on the right track.

Arborbridge wrote:In view of the recent discussion about calculating income per unit according to the number of units on the day of receipt


I must have missed this discussion. Do you have a link to the thread?

Thanks,

Grimer

Arborbridge
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Re: Arb's HYP 10th year

Postby Arborbridge » January 8th, 2017, 12:27 pm

I must have missed this discussion. Do you have a link to the thread?



It was around here for a few posts (in Bree's report):-
viewtopic.php?f=15&t=1932#p19647

tjh290633
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Re: Arb's HYP 10th year

Postby tjh290633 » January 8th, 2017, 12:27 pm

Now I am a little confused, Arb. I have some shares which have negative cost, as trimming in the past has realised more than the original cost. However I also have a rebased cost, which values the remaining holding at the cost per share before trimming. Changing it to that makes more sense of the income%/cost% ratio:

Rank   Epic   Inc/cost
1 IMB 3.41
2 IMI 2.51
3 SMDS 2.44
4 CPG 2.06
5 TW. 1.67
6 NG. 1.64
7 BT.A 1.46
8 VOD 1.42
9 AZN 1.37
10 GSK 1.37
11 BA. 1.29
12 ADM 1.26
13 MKS 1.17
14 BP. 1.14
15 SSE 1.11
16 RDSB 1.09
17 UU. 1.09
18 BATS 1.06
19 DGE 1.05
20 LGEN 0.98
21 WMH 0.98
22 TATE 0.96
23 CLLN 0.96
24 MARS 0.96
25 PSON 0.91
26 BLND 0.86
27 KGF 0.82
28 ULVR 0.82
29 AV. 0.78
30 RIO 0.70
31 SGRO 0.57
32 LLOY 0.55
33 RB. 0.53
34 INDV 0.52
35 BLT 0.20
36 S32 0.11
37 TSCO 0.00


I have the IRR for each share in a different spreadsheet, and that, of course, varies a lot according to how long I've held the share. That list sorted by IRR is:

Position   EPIC   Share                            IRR       Years Held
1 RIO Rio Tinto plc 78.49% 0.70
2 IMI IMI plc 44.08% 7.78
3 LGEN Legal & General Group plc 32.42% 0.57
4 S32 South32 Ltd 31.60% 1.65
5 INDV Indivior plc 25.52% 2.05
6 IMT Imperial Tobacco Group plc 22.40% 20.28
7 LLOY Lloyds Banking Group plc 18.49% 28.07
8 RB. Reckitt Benckiser Group plc 18.25% 5.81
9 DGE Diageo plc 16.51% 7.68
10 BATS British American Tobacco plc 16.19% 6.89
11 SMDS DS Smith plc 15.64% 9.92
12 AZN AstraZeneca plc 15.61% 23.62
13 NG. National Grid Transco plc 15.04% 16.23
14 ADM Admiral Group plc 14.26% 2.85
15 CPG Compass Group plc 14.18% 15.95
16 TATE Tate & Lyle plc 13.76% 17.48
17 BT.A BT Group plc 13.25% 32.13
18 BP. BP plc 13.03% 37.19
19 MARS Marstons plc 12.45% 5.90
20 BA. BAe Systems plc 12.44% 17.13
21 SSE Scottish & Southern Energy plc 11.77% 6.28
22 ULVR Unilever plc 11.67% 6.89
23 VOD Vodafone Group plc 11.58% 10.41
24 MKS Marks & Spencer plc 10.92% 46.95
25 WMH William Hill plc 10.52% 8.85
26 UU. United Utilities Group plc 10.44% 15.43
27 TSCO Tesco plc 9.39% 19.57
28 RDSB Royal Dutch Shell plc B 8.76% 10.60
29 KGF Kingfisher plc 7.81% 9.35
30 AV. Aviva plc 4.60% 6.21
31 SGRO Segro plc 4.18% 9.35
32 PSON Pearson plc 3.77% 7.22
33 TW Taylor Wimpey plc 3.64% 11.37
34 BLND British Land plc 3.49% 6.28
35 GSK GlaxoSmithKline plc 0.07% 6.28
36 BLT BHP Billiton plc -1.37% 6.89
37 CLLN Carillion plc -19.28% 0.70


But that tells a different story.

TJH

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Re: Arb's HYP 10th year

Postby OhNoNotimAgain » January 8th, 2017, 12:43 pm

The worst passive fund was up 9.8% last year
https://www.trustnet.com/passive-funds/uk-equities.html
how much data does it take to persuade people that actively managing a portfolio might be great fun but is actually eroding your wealth?

Rob

Moderator Message:
This post has been reported as off topic. Rob, please stay on topic. Your post has nothing whatsoever to do with HYP practicalities. MDW1954

grimer
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Re: Arb's HYP 10th year

Postby grimer » January 8th, 2017, 1:33 pm

OhNoNotimAgain wrote:The worst passive fund was up 9.8% last year
https://www.trustnet.com/passive-funds/uk-equities.html
how much data does it take to persuade people that actively managing a portfolio might be great fun but is actually eroding your wealth?

Rob


My HYP accumulation unit price increased by 15.56% and my income unit price increased by 10.93%. I do hold trackers within my overall portfolio, but I think there is a valid argument for both types of investment. Managing a HYP has also increased my ability to mange substantial sums of money, become familiar with my psychology of investing and improved my knowledge of various investment strategies.

Since I began my 'active' investments six and a half years ago I have seen a 10.73% CAGR.

HSBC FTSE All Share Index Fund Retail Accumulation fund has returned 9.58% CAGR over the same period.
http://funds.ft.com/UK/Tearsheet/Summary?s=GB0000438233%3AGBX

Are you sure that your dogmatic approach to investing isn't eroding your wealth?

Moderator Message:
Guys, please stay on-topic, and ignore Rob's bait. Further posts will be removed. MDW1954

zxc100
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Re: Arb's HYP 10th year

Postby zxc100 » January 8th, 2017, 3:04 pm

I have read many posts here over the last 1-2 years with interest. HYP comes close to how I invest but this has been a process evolving over several decades and i do wish I had had access to resources such as TMF or Lemonfool in earlier years. It has been at times an expensive education.

I recently set out to calculate XIRR having read of it here. I calculated back to April 02 as I felt my portfolio had started to reach a reasonable size then. Prior to that I had data but decreasingly relevent due to time and portfolio size. I was disappointed to have achieved only 6.3% CAGR. Clearly starting point has a huge impact and I had some large losses in 08 09. This makes a point that I have learnt well. Avoid big losses! If you lose 33% in one year even a 40% gain the next year gives you a 2 year loss of 6%. If I had only taken from April 09 ky CAGR would be 14.3%.

I do not use the income and while still at work am focused on total return but work with the knowledge that most return is likely to be from dividends. I would like to ask why so many of you unitise? Surely the only thing that matters is the level of your income and how much it changes or in my case the annual change in value? Perhaps you enjoy the exercise?

I hope some of you might give me your (brief) thoughts.

Best wishes
Zxc

OZYU
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Re: Arb's HYP 10th year

Postby OZYU » January 8th, 2017, 4:41 pm

zxc100 wrote:I have read many posts here over the last 1-2 years with interest. HYP comes close to how I invest but this has been a process evolving over several decades and i do wish I had had access to resources such as TMF or Lemonfool in earlier years. It has been at times an expensive education.

I recently set out to calculate XIRR having read of it here. I calculated back to April 02 as I felt my portfolio had started to reach a reasonable size then. Prior to that I had data but decreasingly relevent due to time and portfolio size. I was disappointed to have achieved only 6.3% CAGR. Clearly starting point has a huge impact and I had some large losses in 08 09. This makes a point that I have learnt well. Avoid big losses! If you lose 33% in one year even a 40% gain the next year gives you a 2 year loss of 6%. If I had only taken from April 09 ky CAGR would be 14.3%.

I do not use the income and while still at work am focused on total return but work with the knowledge that most return is likely to be from dividends. I would like to ask why so many of you unitise? Surely the only thing that matters is the level of your income and how much it changes or in my case the annual change in value? Perhaps you enjoy the exercise?

I hope some of you might give me your (brief) thoughts.

Best wishes
Zxc


First, don't be disappointed, here are, for example, the total returns for FTAS from various year ends, as you can see you were in good company, look at from end 2001.(Sorry about the look of the table, my first attempt on this site).

FTSE ALLSHARE TOTAL RETURN FROM VARIOUS YEAR ENDS



As to why some of us unitise, simple (but bear in mind that one can get by without perfectly well too and there is also a range of simple measures which can tell you broadly how one is doing): Adding and subtracting cash from a portfolio can mask and distort key performance measurements. Once properly set up, unitisation just gets calculated as you enter normal portfolio activity(divis, cash movements...) in your system, so, imho, is not any kind of hassle after the initial effort. I have not changed my system for years, never lift a finger beyond typing in basic portfolio activity data ONCE, and out it pops, accurately calculated but summarised alongside all sorts of other stuff as I want it on a rolling basis.

Unitising allows you to measure yourself against the index of your choice(which ideally seeks to reflect the composition of your portfolio). For income units use the plain version of such index, for accumulation units use the total return version. Because I invest beyond the ftse350 in my HY portfolio, I have chosen to use FTAS TR, hence I had the data above to hand. Many 'unitisers' calculate both inc and acc units because that too is easy to set up while you are at it and the byproducts are complementary.

For HY investors, such a key measure would be how the underlying dividends have progressed, which can be massively masked by cash flowing into the portfolio and the process of re investing divis. To calculate this you would need to use income units first, then calculate divis per income unit, preferably (but not essential)cumulated 'on the nail' and see how they are progressing (although it can be done from accumulation units but a correction needs to be applied in that case as there is an element of double counting there).

You are interested in TR, so accumulation units might be your choice. As your portfolio ages, your portfolio IRR, which you are familiar with, from those far away dates will converge very near with the rate at which accumulation units have compounded over the same period(I was comparing such data with another very experienced investor off board very recently and for both of us, beyond around ten years plus the difference was negligible in term of the performance message it sends back to the investor) . I use this comparison as one of many cross checks for data integrity. Ignore this comparison in the early years of a portfolio, when cash injections are still a large proportion of your portfolio, or if there are very large cash movements.

Hope this helps to give you a flavour, I have played with this lot since around 1982, having been introduced to it by an investment manager making a presentation to our then investment club as part of their corporate community effort, but yes you have to enjoy doing this kind of thing.

Ozyu

PS Nice posts Arb. I don't believe in recs, but have some virtual ones anyway!

grimer
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Re: Arb's HYP 10th year

Postby grimer » January 8th, 2017, 5:10 pm

My portfolio spreadsheet makes use of various vlookups to calculate the daily 'close' value of my holdings. I simply dump in the share price data and everything populates.

I use this spreadsheet tool to download the share price data:

http://investexcel.net/multiple-stock-quote-downloader-for-excel/

I'm not sure if my solution is as elegant as other people's that post here, but I'd be happy to strip out my data and share it, if you're interested?


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