The good, the bad and the uggerly

[Arborbridge]

Here's the latest table of beauty and the beast contestants. Included are all the shares in my HYP which have been held "long enough" to give a reliable XIRR calculation - 32 shares in all. By long enough, is when I feel the XIRR result has settled down - usually about two or three years after purchase.

I might need some help with this table, in that it is pointing to some possible decision makings as regards sells. I don't like churning a portfolio, but there are some serial offenders which could be axed. That is always a hard decision as half the time it is the wrong thing to do. The shares are ranked in order of XIRR and for each is shown the average position in this table since I started the rankings in 2013. Here goes:-



One could kick off the list of potential sells by looking at the ones where the XIRR is less than the share's yield, and/or combine this with a low average ranking. With 30 plus shares, anything with an average in the high 20s should be suspect.

Serial bad boy is Lloyds: but with interest rates increasing, would this be the best choice? My own favourite for disposal is WPP - a disappointment in several ways. I spent years looking for a buy point, then within three weeks of my buying, Sir Martin Sorrell resigned
Next up: Tesco, which has always languished near the bottom despite being a huge household name which takes so much of our earnings. Other are SBRY, AV and PSON.

The other point is; should I even be thinking of making changes of any sort during the current period on the markets? Whatever I do, it'll be evolutionary rather than drastic.

Arb.

[kempiejon]

There must be something in the air. I try hard not to sell but come the change in the tax year I do a little housekeeping. I don't have cash enough for a full new ISA and SIPP but I add monthly (still working) and I did capital gains harvesting in March so I've picked a few shares and have spent half an hour setting limit orders to sell a few un-sheltered HYP picks. I've also made a google sheet to track the changes in value of other shares I might fancy seeing off this year.
Arb
I must have followed you into WPP or you me.

My own favourite for disposal is WPP - a disappointment in several ways. I spent years looking for a buy point, then within three weeks of my buying, Sir Martin Sorrell resigned

Perhaps not 3 weeks but in the ball park. They should be rated for recovery, the dividend might be on the rise and the 3ish% yield not awful. But my non ISA holding is for the chop if they reach recent highs in the next 3 months. I can find better income prospect I think. As you say half the time I might be wrong.

[Dod101]

I would certainly get rid of both supermarkets. I have not held any for many years and do not regret it. They are reverting to type; simply doing their best to take market share off each other and the way to do that is lower prices. That is no way to make good profits.

Lloyds? Well none of the banks are doing brilliantly but Lloyds being so concentrated in the UK is not much of an investment.

Aviva I have never held as you will know and would not buy now but the current CEO is making things happen and you never know. I would hold it rather than say WPP and the supermarkets.

Trouble is that we are not you and you must decide!

Dod

[tjh290633]

It's funny. Last year MKS gave me the highest increase of all, just short of a 70% rise in price. This year it wins the booby prize, down 33.7% to date. Last year the laggard was RIO, down 10.6%, this year it is well up at 25.5%.

I always maintain that last year's losers may well be next year's winners. Not always, but quite often.

TSCO was up 25.3% last year, down 6.8% this year so far. Don't be too hasty to cull a holding.

TJH

[Arborbridge]

It's funny. Last year MKS gave me the highest increase of all, just short of a 70% rise in price. This year it wins the booby prize, down 33.7% to date. Last year the laggard was RIO, down 10.6%, this year it is well up at 25.5%.

I always maintain that last year's losers may well be next year's winners. Not always, but quite often.

TSCO was up 25.3% last year, down 6.8% this year so far. Don't be too hasty to cull a holding.

TJH

Yes, I am aware of that difficulty with selling! The trouble is, I have been waiting for a very long time to see Lloyds and Tesco "come right" - how long should one wait (rhetorical question )

Arb.

[Dod101]

It's funny. Last year MKS gave me the highest increase of all, just short of a 70% rise in price. This year it wins the booby prize, down 33.7% to date. Last year the laggard was RIO, down 10.6%, this year it is well up at 25.5%.

I always maintain that last year's losers may well be next year's winners. Not always, but quite often.

TSCO was up 25.3% last year, down 6.8% this year so far. Don't be too hasty to cull a holding.

TJH

Yes, I am aware of that difficulty with selling! The trouble is, I have been waiting for a very long time to see Lloyds and Tesco "come right" - how long should one wait (rhetorical question )



Arb.

Rhetorical answer: Don’t.

Dod

[IanTHughes]

XIRR is a measurement of Total Return and an historical measure at that. What you appear to be suggesting is that you should sell those holdings which have, over the period of time that you have held (a time period that varies for every holding), given a lower Total Return. For what purpose may I ask? A better Total Return?

Incidentally, my XIRR calculation for Aviva (AV) is 7.49% rather than your figure of 2.74%. The same calculation for my holding of WPP is 5.64%, rather than your -1.34%. Would that mean that, using your sales calculation algorithm based on XIRR, your portfolio would indicate a need to sell AV and WPP, while my portfolio would not?

I follow the High Yield Portfolio (HYP) strategy, an income strategy which, unlike your strategy apparently, has no need of any algorithm to kick off sales. But if my HYP strategy did entail regular churning of the portfolio, and was in need of an algorithm to calculate which holdings should be sold, it would most assuredly be based on the current/forecast yield, and whether it would be able to increase that yield by moving the funds to another holding or holdings. HYP is an income strategy after all.

With Aviva (AV) yielding 5.18%, and Sainsbury (SBRY) 4.30%, I doubt that either one would be for the chop, if using yield as a calculator. Even WPP (WPP), with a yield of 3.14%, would probably survive. Much more likely would be the removal of AstraZeneca (AZN), yielding 2.00%, with the proceeds being used to purchase a higher yield and therefore more income. As I understand it, by your method AZN is most definitely a keeper!

Each to their own, I guess.


Ian

[moorfield]

But if my HYP strategy did entail regular churning of the portfolio, and was in need of an algorithm to calculate which holdings should be sold, it would most assuredly be based on the current/forecast yield, and whether it would be able to increase that yield by moving the funds to another holding or holdings. HYP is an income strategy after all.

Much more likely would be the removal of AstraZeneca (AZN), yielding 2.00%, with the proceeds being used to purchase a higher yield and therefore more income.

Completely agree, that is my strategy, and I sold AZN last week yielding less than half of my benchmark that winds people up here, CTY. I notice its price has ticked up further above £100 since but that doesn't bother me. I will be near trebling the forecast income the released funds can buy tomorrow.

Edit: Conversely, neither AZN nor I think GSK would make a "new" HYP selected today.

[Arborbridge]

It's funny. Last year MKS gave me the highest increase of all, just short of a 70% rise in price. This year it wins the booby prize, down 33.7% to date. Last year the laggard was RIO, down 10.6%, this year it is well up at 25.5%.

I always maintain that last year's losers may well be next year's winners. Not always, but quite often.

TSCO was up 25.3% last year, down 6.8% this year so far. Don't be too hasty to cull a holding.

TJH

Yes, I am aware of that difficulty with selling! The trouble is, I have been waiting for a very long time to see Lloyds and Tesco "come right" - how long should one wait (rhetorical question )



Arb.

Rhetorical answer: Don’t.

Dod

And here we come to the counter-intuitive part of HYP..... I notice Diageo's yield is under 2% and Tesco is around double that. According to the scheme I am running (based on TJH) this suggests I should sell off - or a least trim - one of my more successful investments (DGE) and invest in one of my least successful.

Dod, you would say you don't have to do that, use your commonsense. OTOH what use is a method if one does not stick to it, as Terry does - and actually, TESCO at 4.1% and a cover of 2x on the face of it is not a bad candidate: it even has the given years of rising income required for PYAD. Only my knowledge of the comparative XIRRs alters the landscape.
And as for Diageo: if I am after income, how can one justify holding 1.5x median weight (quite a considerable sum now) in a share which gives less than 2% yield when that could easily be doubled, even excluding Tesco? Diageo provides less income than any share bar three in the HYP, yet is the fourth biggest share - a HYP might argue that it isn't pulling it's weight at all.

In the red corner, I give you Dod: in the blue corner, Terry

Arb.

[Arborbridge]

But if my HYP strategy did entail regular churning of the portfolio, and was in need of an algorithm to calculate which holdings should be sold, it would most assuredly be based on the current/forecast yield, and whether it would be able to increase that yield by moving the funds to another holding or holdings. HYP is an income strategy after all.

Much more likely would be the removal of AstraZeneca (AZN), yielding 2.00%, with the proceeds being used to purchase a higher yield and therefore more income.

Completely agree, that is my strategy, and I sold AZN last week yielding less than half of my benchmark that winds people up here, CTY. I notice its price has ticked up further above £100 since but that doesn't bother me. I will be near trebling the forecast income the released funds can buy tomorrow.

Edit: Conversely, neither AZN nor I think GSK would make a "new" HYP selected today.

Note, for info, I did trim Diageo and AZN recently, so I am agreeing with both you and Ian Hughes on this, in practice (althouth not prone to completely selling out). The point of displaying my XIRR is to give a different perspective which can give a base for discussion as well as an input into possible trimming decisions.

To answer Ian's point about his XIRR compared with mine, I am aware naturally, that this measure is very personal and depends on several factors. However, given a long holding length it does indicate where long term problems might lie and beg the question of how long should one wait for a share to "self-heal", in the case of Lloyds for example. Only a dyed in the wool HYPer with blinkers on would not ask such questions.

Arb.

[BullDog]

Sell winners to invest in losers? I don't think so. Myself, I would say the bottom 7 or 8 on that list should get chopped.

[daveh]

In that situation, if a low yielder is well above my set trimming level I chop it back and reinvest in a higher yielder. So far only done with SEGRO. The only "problem" was that it's share price has kept rising since trimmed. I have a few no yielders that are on my list to sell when I think they have reached fair value. I do find it difficult to sell my winners though, but if they get large enough I do so just to reduce risk.

[Dod101]

Arb,
If you really want/need income then obviously you top up Tesco and sell Diageo but that to me is for someone recently retired and anxiously needing the income. Most of my income probably like yours is sheltered in an ISA or a SIPP so tax is not a consideration. I prefer now that I more or less have sufficient income to look at total return. I do not mind adding to my income especially with high inflation looming. In fact I have just checked my accumulated dividends to date for this year and I am about 10% ahead of last year at the same time. It is early days but that is good.

But a share like Diageo? Well I would not be selling that. Obviously if you fully embrace the HYP concept, you have not got much choice unless- here's the get out- you establish a separate portfolio called growth to sit alongside the HYP. Then you can have the best of both worlds.

I have an income portfolio and a much smaller growth one but in truth very few shares are held simply for the income (or growth for that matter), although the tobaccos are; it is more a difference in emphasis.

Dod

[Dod101]

But if my HYP strategy did entail regular churning of the portfolio, and was in need of an algorithm to calculate which holdings should be sold, it would most assuredly be based on the current/forecast yield, and whether it would be able to increase that yield by moving the funds to another holding or holdings. HYP is an income strategy after all.

Much more likely would be the removal of AstraZeneca (AZN), yielding 2.00%, with the proceeds being used to purchase a higher yield and therefore more income.

Completely agree, that is my strategy, and I sold AZN last week yielding less than half of my benchmark that winds people up here, CTY. I notice its price has ticked up further above £100 since but that doesn't bother me. I will be near trebling the forecast income the released funds can buy tomorrow.

Edit: Conversely, neither AZN nor I think GSK would make a "new" HYP selected today.

That seems a weird strategy. Having kept Astrazeneca when it was going nowhere capitalwise but had a decent yield, now that its capital value is coming along quite well and it is at least maintaining its dividend , sell it. For income you are certainly no worse off by keeping it, but now that it is adding some capital gains as well, who wants that? The very idea!

As I said on my other post, if you are newly retired and really need the income I can understand it but if at any other time, and especially in the accumulation stage, it is totally illogical.

Dod

[IanTHughes]

But if my HYP strategy did entail regular churning of the portfolio, and was in need of an algorithm to calculate which holdings should be sold, it would most assuredly be based on the current/forecast yield, and whether it would be able to increase that yield by moving the funds to another holding or holdings. HYP is an income strategy after all.

Much more likely would be the removal of AstraZeneca (AZN), yielding 2.00%, with the proceeds being used to purchase a higher yield and therefore more income.

Completely agree, that is my strategy, and I sold AZN last week yielding less than half of my benchmark that winds people up here, CTY. I notice its price has ticked up further above £100 since but that doesn't bother me. I will be near trebling the forecast income the released funds can buy tomorrow.

Edit: Conversely, neither AZN nor I think GSK would make a "new" HYP selected today.

That seems a weird strategy. Having kept Astrazeneca when it was going nowhere capitalwise but had a decent yield, now that its capital value is coming along quite well and it is at least maintaining its dividend , sell it. For income you are certainly no worse off by keeping it, but now that it is adding some capital gains as well, who wants that? The very idea!

As I said on my other post, if you are newly retired and really need the income I can understand it but if at any other time, and especially in the accumulation stage, it is totally illogical.

Just to be clear, what I said was:

IF my HYP strategy did entail regular churning of the portfolio

Of course, my HYP strategy does not include any such action!


Ian

[Arborbridge]

Sell winners to invest in losers? I don't think so. Myself, I would say the bottom 7 or 8 on that list should get chopped.

Well, as I have always pointed out, HYP tends to reverse the usual mantra, and that's because it seeks to maximise income and desensitise our views towards the share price growth. It is a high risk strategy, mitigated by its safety factors. If you never intend to sell (the comparative being losing your capital entirely to an insurance company) and are content with high and rising income in place of higher capital growth, it completely transfigures your perspective.

As a matter of interest, I might even look at doing what you say and see how my income would be affected.


Arb.

[Arborbridge]

That seems a weird strategy. Having kept Astrazeneca when it was going nowhere capitalwise but had a decent yield, now that its capital value is coming along quite well and it is at least maintaining its dividend , sell it. For income you are certainly no worse off by keeping it, but now that it is adding some capital gains as well, who wants that? The very idea!

As I said on my other post, if you are newly retired and really need the income I can understand it but if at any other time, and especially in the accumulation stage, it is totally illogical.

Dod

Newly retired? Terry, I believe, is over 80 and still ratchets up his income whenever possible.
The alternative view is: does DGE or AZN deserve such a huge (relative) holding when they provide half the income that another share could? In fact, my Reckitt holding (a traditional stalwart low yielder) now produces so little, I'm seriously thinking of selling it because I can't be bothered to account for it - it's almost dead wood.

Arb.

[Dod101]

That seems a weird strategy. Having kept Astrazeneca when it was going nowhere capitalwise but had a decent yield, now that its capital value is coming along quite well and it is at least maintaining its dividend , sell it. For income you are certainly no worse off by keeping it, but now that it is adding some capital gains as well, who wants that? The very idea!

As I said on my other post, if you are newly retired and really need the income I can understand it but if at any other time, and especially in the accumulation stage, it is totally illogical.

Dod

Newly retired? Terry, I believe, is over 80 and still ratchets up his income whenever possible.
The alternative view is: does DGE or AZN deserve such a huge (relative) holding when they provide half the income that another share could? In fact, my Reckitt holding (a traditional stalwart low yielder) now produces so little, I'm seriously thinking of selling it because I can't be bothered to account for it - it's almost dead wood.

Arb.

What individuals do is their own business and I am only saying what I do.

I cannot understand why people hold Reckitt in a HYP or at all in fact. It seems to me to be a serial underperformer. I do not even like their products very much.

Dod

[IanTHughes]

Myself, I would say the bottom 7 or 8 on that list should get chopped.

As a matter of interest, I might even look at doing what you say and see how my income would be affected.

The yields that would be disposed of are:

EPIC | Company              | Yield
AV   | Aviva                | 5.18%
HSBA | HSBC Group           | 3.59%
IMB  | Imperial Brands      | 8.31%
SBRY | Sainsbury            | 4.20%
PSON | Pearson              | 2.69%
TSCO | Tesco                | 3.37%
WPP  | WPP                  | 3.21%
LLOY | Lloyds Banking Group | 4.49%

It is a strange Income Strategy that even considers disposing of any holdings with the foregoing yields. Unless of course it was thought that the dividends in question were under risk, not something that I have discovered.

As I said, it takes all sorts but, I shall continue with my High Yield Portfolio (HYP) strategy.


Ian

[Arborbridge]

I cannot understand why people hold Reckitt in a HYP or at all in fact. It seems to me to be a serial underperformer. I do not even like their products very much.

Dod

This could be one reason: https://www.dividenddata.co.uk/dividend ... py?epic=rb.

Excellent record of rising dividends over the decades, and if you have held over a long period it has been a real winner. I know one older lady who inherited shares from a retired executive of Reckitt and hs lived very happily on them every since - a bit of a Doris.

I bought when the yield was quite reasonable at around 3.5% - the kind of yield you rather pprove of - and at near the best it gets for Reckitt. Not liking their products isn't particularly relevant to the success or otherwise of an investment. Some people don't like bombs or fags, but still invest in them.

With a forecast yield of around 3%, they are safe for the moment unless I just have a weak moment when entering up such a small amount: the income is also expensively bought at the moment as the price is depressed. I guess they pay for a couple of opera seats a year

Arb.