Dig the Dog is Dead

[Arborbridge]

Well, I've gorn and dunnit. After many months, even years, of deliberation, I have sold my holding in Dunedin Income Growth IT. With my record, it suggests that DIG will now have a sparkling year!

I've been hesitant owing to the good yield and large discount, and also because it is so like a twin to my holding in Murray Income Trust that it was difficult to choose between the two. The capital released has been split between other ITs in my basket: EDIN, CTY, SCF and a small top up of MRC.

Overall, I will pay a penalty of 1.5% in lost dividends. The quid pro quo is less admin (a constant theme with me these days) and almost certainly a better capital appreciation, plus, in time, a good chance of making that dividend back in higher growth.
I've been able to do this because my overall dividend income is in a health state so a small drop will not affect me overmuch.

My current basket looks like this in descending order of current value (not, this is not intended to be an "equal weighting" or a pure "Luni"basket and never has been:


I realise this is not a conventional income IT basket, but it was never intended to be. BRCI, for example, was an opportunist addition when the price was low. UKDV is there as an interesting experiment, comparable to a HYP style alternative for my dotage (before anyone come back on this, I know it isn't the same as HYP). Law Debenture is a legacy holding from many decades ago: it is strange, but harmless so stays for the present.

Arb.

[midgesgalore]

Well, I've gorn and dunnit. After many months, even years, of deliberation, I have sold my holding in Dunedin Income Growth IT. With my record, it suggests that DIG will now have a sparkling year!

I've been hesitant owing to the good yield and large discount, and also because it is so like a twin to my holding in Murray Income Trust that it was difficult to choose between the two. The capital released has been split between other ITs in my basket: EDIN, CTY, SCF and a small top up of MRC.

Overall, I will pay a penalty of 1.5% in lost dividends. The quid pro quo is less admin (a constant theme with me these days) and almost certainly a better capital appreciation, plus, in time, a good chance of making that dividend back in higher growth.
I've been able to do this because my overall dividend income is in a health state so a small drop will not affect me overmuch.

etc, etc
Arb.

Hi Arb
I just looked at the AIC for DIG the dog;
http://www.theaic.co.uk/companydata/222/performance

To me it looks like it has been outstripping its benchmark lately so you may well be correct on your outlook for the trust.


As soon as I can have some clear thinking time my plan is to move from my SIPP and old ISA accumulation unit trusts into income and growth Investment trusts and ETFs - unless some unit trusts, the likes of Marlborogh Multi Cap Income + platform charges, work out less expensive to hold.

One question though, I see you hold CTY and it is a dependable yielder yet you also hold a HYP; since this trust has all the stocks or "likely HYP suspects" I wonder why you would do this - and the same with UKDV for that matter?

I expect it is a comparison with the HYP with a view to make a switch of HYP to IT basket in the event it is difficult to maintain your HYP? Otherwise I would have thought ITs & ETFs would cover the wider global markets.


It would be appreciated if you comment as the jury is still out a bit with my own grand plan.

midgesgalore

[BarrenWuffett]

Well, I've gorn and dunnit. After many months, even years, of deliberation, I have sold my holding in Dunedin Income Growth IT. With my record, it suggests that DIG will now have a sparkling year!

I've been hesitant owing to the good yield and large discount, and also because it is so like a twin to my holding in Murray Income Trust that it was difficult to choose between the two. The capital released has been split between other ITs in my basket: EDIN, CTY, SCF and a small top up of MRC.

Well done! I came to the same conclusion about this and Murray Income from the same stable a while back and sold both and recycled the proceeds into Vanguard Lifestrategy 60.

I continue to hold City of London, Edinburgh, Temple Bar, Aberforth Smaller, and Finsbury Gr & Income all of which have provided decent returns over the past 5 yrs.

I also wonder how your basket of ITs compare with your hyp shares?

[Arborbridge]

Thanks for the replies, guys.

Midgesgalore:

Your guess is correct on both counts. I'm running ITs which are rather HYP-like to see how the comparisons work out. In time, when I can no longer be bothered to run a HYP (which does take a certain amount of effort) I might depend on those ITs, so I need to know just how reliable they are. Further, if I pop my clogs before my wife, then she would also find ITs a mite easier. So it's all learning and contigency.
I would however add that because we are all fishing in the same pond, does not mean the results will be the same. If you compare a bunch of UK income ITs there is quite a wide divergence - which is, of course, why I sold DIG.

BarrenWuffett:

I'm holding on to MUT for the moment, though it may well go later. I do not rush to these decisions:) MUT just about escaped the axe this time, only because it's long term performance was better than DIG, in my view. Otherwise they are like two peas in a pod, almost.

I also wonder how your basket of ITs compare with your hyp shares?

I hope to say more about this in the coming weeks. However, I'd say broadly speaking that HYP until now has given slightly more income per capital but with slightly less capital appreciation. There is an uncomfortable chart which suggests that my IT income is growing faster than my HYP's income. Owing to this observation, made at the end of 2015, I reduced slightly the ratio between HYP and ITs. It was 2 to 1, but now more like 1.7 to 1.

BTW, one shouldn't ignore OEICS altogether. I have a small account with income OIECS which for the past few years has produced good total returns, comparable to HYP and ITs. Slightly lower yield, though.

With investment, I always get the feeling the jury is out - and always stays out! By the time the verdict is in, it could all be irrelevant

[John]

I've noticed that City of London IT is shown every day on:-

https://www.google.co.uk/finance

as (usually) the day's biggest faller, always -27.37%, but also one of the biggest risers, at 9.14%. Actually the 2 links seem to relate to different classes of share when clicked on.

I sent a comment to https://www.google.co.uk/finance about this several months ago, but without effect.

[Arborbridge]

as (usually) the day's biggest faller, always -27.37%,

It's difficult to believe that is genuiine for such a big share. Probably a glitch: I'd love to be able buy on a 25% fall but it's probably one of those things that one could not do in practice.

I checked the google chart for 2016, and the biggest daily range I spotted was on 24th June at 12.7%.

[mc2fool]

as (usually) the day's biggest faller, always -27.37%,

It's difficult to believe that is genuiine for such a big share. Probably a glitch: I'd love to be able buy on a 25% fall but it's probably one of those things that one could not do in practice.

I checked the google chart for 2016, and the biggest daily range I spotted was on 24th June at 12.7%.

I believe John is talking about Google Finance UK's Trends list. If you go to https://www.google.co.uk/finance and scroll down to Trends and (if it's not already selected) click on Price you'll see what he means.

As he notes, the "gainer" isn't CTY but is BA69, which is their 4.2% Cumulative First Preference Stock, although it doesn't list it as such, and, anyway, just as much as CTY hasn't dropped 27.37% BA69 hasn't gained 9.14% either, so there's glitch upon glitch upon glitch here!

I wonder, has anybody looked into the other issues by this long time stalwart? From what I can make out, as well as the main shares, CTY, there is also listed on the LSE:

97IN 8 1/2% Debenture Stock 2021 
82IL 10 1/4% Debenture Stock 2020
BA69 4.2% Cumulative First Preference Stock
CTYA 4.2% Non-Cumulative Second Preference Stock
BA47 14% Non-Cumulative Preferred Ordinary Stock

Curiously, while both LSE and Digital Look describe BA69 and BA47 as above, CTY's annual report describes them as 6% and 20% respectively. https://az768132.vo.msecnd.net/document ... 3.gzip.pdf page 50.

Anyway, I'd imagine that these are all but impossible to get, with the last 5 trades for each one being spread across months*, but they are an amusing curiosity. Well, sort of ...

* e.g. BA69 http://www.londonstockexchange.com/exch ... .html?ds=0

[Arborbridge]

Mc2fool,
All quite puzzling, but the important point is that CTY probably didn't move by 25% but traded within a few pence.
It would be a major upset if a stock that big moved so far unless someone had a very fat finger! Oh joy - if only one could have bought at 25% under to normal price! That would be like buying at a price of about 4 years ago and booking an instant massive profit.

I haven't looked into the other issues.


Arb.

[mc2fool]

It would be a major upset if a stock that big moved so far ...

It'd be an even more major upset if it did it every day, day in day out, for several months, as John says Google has been showing

[TahiPanas]

Arb,

I agree that DIG and MUT woof and sniff bottoms. More controversially, I think MRCH howls from the kennel next door.

MRCH is popular on this forum probably because of its big dividend. However, I feel this bounty is partly at the cost of capital depreciation. I think capital does matter, just not nearly so much for we dividend investors.

I haven't yet got round to euthanizing the 3 of them. This is mainly due to indolence, encouraged, like yourself, by a spotty track record in perceived-hound disposals.

Also, the 3 of them together don't amount to a single holding in value. This leads to my next quite different point.

You've got 21 ITs. Whilst accepting that ITs in the same sector perform differently, you may be a tad over-diversified. Each IT has a large element of in-built diversification. However, I can't really see any real disadvantage in holding so many. Personally, I couldn't be bothered.

I've got Luni's Basket of 8 and, even allowing for the canine presence above, I am not unhappy with them as a whole which was his defining principle . That's probably another reason I am avoiding a tearful visit to the vet.

By the way Luni, I KNOW you're reading this. Come back! All is forgiven!!!!!! I need a laugh!

[toofast2live]

Arb, why pure equity ITs? I see there is s sprinkling of infrastructure and commodities but no property, for example. Personally I like the income outlook for the Ground Rent and Student biased property ITs. In addition tere is at least 1 biotech income play and a couple of private equity income funds. Any thoughts? My wife's portfolio also contains three p2p lending ITs - but I know that many here consider that supping with the devil

[Arborbridge]

toofast2live:

Originally, I decided not to bother with property as much wealth is already tied up there with my home and BTLs.
I'm not in a hurry to alter it or diversify further for the moment. As was pointed out, I have 21 IT/ETFs and at present my thrust is to reduce rather than increase complexity.
I'm moderately happy with the old general war horses for the moment, but maybe at some point I should look at some other areas. Any specific funds you are into for PE and biotech?

However, I can't really see any real disadvantage in holding so many. Personally, I couldn't be bothered.

Tahipanas - did you mean I can't really see any real advantage in holding so many?

Well, you think I'm overdiversified, and toofast thinks I should be adding more I basically started with a clutch of Luni's plus some pre-Luni ITs such as Law Deb. One or two were added for specific reasons, and it grew to 21!
I could axe Law Deb, but it does no harm, so maybe one day, or maybe I won't bother. Luni wasn't into foreigners, so I added a couple. BRCI was a proxy in place of buying more pure miners in my HYP. CNY started out as a bit of a punt on its discount but is now paying a decent dividend which is why it is still there. CMHY is the sole rep for fixed interest - potentially one to go, but the TR is good. UKDV is "experimental" - may expand, may be axed.

No doubt I'll have rethinks now and again, but this is where I am at present - and I'm not one to make rapid decisions. Too many times I've switched supermarkets queues and found I'm in the slowest one again.

[bonrepos]

Arb,

In gentle praise of Law Debenture, it does have about 30% investment ex Uk as opposed to about 15%
maximum for the obvious Uk equity income ITs.

This might be an advantage with the apparent ongoing fall in sterling.

Just a thought.

[Arborbridge]

This might be an advantage with the apparent ongoing fall in sterling.

Thanks for pointing that out - certainly worth hanging on. I've had LWDB for about 25 years so there's no hurry!

Arb.