I have a plan (of sorts)

Honest reporting on shorter-term trading activity and ideas
PrincessB
Posts: 46
Joined: November 10th, 2016, 3:26 pm

I have a plan (of sorts)

Postby PrincessB » November 13th, 2016, 3:40 pm

Hello everyone.

I have been thinking hard about the best way to trade in order to enhance gains while minimising risk and not having to be near a screen at all times.

I have some ideas which I'm going to explore on this board and as a strategy requires a name, I'll call it '100 trades to a million' - A better name would be 'Dividends a Go-Go!'

The general rules are:

Dividends are crucial - So the aim is to look for companies with a reasonable dividend yield who are in a position to grow their dividend payments fast.

A dividend of under 2% is not acceptable and any fast growing holding yielding under 2% will be culled and the proceeds will be reinvested into another company with a more enticing dividend.

Each new buy should add 1% to the value of the portfolio - Nice and easy if you've got a £100k portfolio as minimum new spend is £1000 - At the approach to the million mark you're looking for £10k at a time.

Having been burned on a number of occasions by 'Jam tomorrow' shares, I've had enough of this speculative stuff and will consider 3% as a minimum yield for any new entrant to the portfolio - I am less concerned by market capitalisation and while I'll select ISA suitable companies ahead of micro caps, the yield, yield growth and sustainability are ever so important.

My feeling is that fusing a combination of the high yield portfolio and the value portfolio methodologies will provide an ever growing income stream with a view towards using each dividend to add to the portfolio.

With this meagre set of rules, number of companies held is unlimited - This might make portfolio reviews a bit tricky, but hey ho.

Of course all rules can be disregarded if I stumble upon the 'big one' at which point, I've decided I'll sell half of the portfolio by value/yield and go for it.

I find this combination of yield, value and growth when selecting stocks quite compelling as most of the screening programs aim for the extremes and while you can find plenty of shares with a 10%+ yield you'll only get one dividend and by the same token companies who grow at 25%+ per year don't keep it up for that long.

In the real world, I've got a portfolio valued a bit above £100k. I add from salary £300 per month and the goal is to find the cash for the next buy.

What would you be buying given the criteria?

Regards,

B.

spasmodicus
Posts: 3
Joined: November 6th, 2016, 9:35 am

Re: I have a plan (of sorts)

Postby spasmodicus » November 14th, 2016, 11:50 am

Hi there PrincessB,
here goes, this is my first post on Lemonfool after arriving from TMF. I have always been interested in the trading to £1 million idea, but I concluded long ago that there's no fool proof (Lemon or Motley) strategy.

One thing I would say is that "minimum spend £1000" is maybe too small. Depending on your trading platform, your dealing cost is likely to be about £10, plus stamp duty 0.5%, which for a buy-sell "round trip" means a trading cost of 2 x £10 + 0.5% of £1000, i.e. £25/£1000 or 2.5% of the amount traded! This might not be so important in a buy-and-hold strategy, but in an active trading situation it will eat into your gains big time. With a £100k portfolio, you could have as many as 100 holdings, which is too many to manage.

If you bump the minimum trade up to, say, £2500 you will reduce the frictional loss to around (2 x £10 + £12.50) / £2500, or 0.9%. You will still be able to have about 40 holdings on the go, which will be enough to keep you out of mischief!

best
S

Paultry
Posts: 16
Joined: November 4th, 2016, 11:09 am

Re: I have a plan (of sorts)

Postby Paultry » November 14th, 2016, 2:54 pm

Trades with iWEB are £5, so in and out on £1,000 is £10 plus £5 tax. Total = £15
And it just goes up by £5 for every extra £1,000 invested.

However, if you were to go in and out of a share the spread will readily eat into your money. I would like to sell my 258 shares in Dialight, and was heartened this morning when I saw they were 725p. But the price offered is a mean 697p so I tend to leave stuff alone, but I'm desperate to sell.

As to what to buy, National Grid is my pick of the week since it is a reasonable dividend and it is not a declining industry.
I like Carillion too but the dividend is so high I can only guess it will be cut and the share will languish along with my holdings of Ladbrokes, Morrisons and First Group. These were all purchased with the best of intentions but once the dividend is cut and the share price reduces you just have to sit and wait until the green shoots of recovery appear.

On a different board, I was debating whether to sell Cobham. If the dividend holds I will be receiving around 6.9% in dividend payments next year, based on my purchase price. If the dividend is cut or suspended the share price will reduce and I'll feel I'm stuck with another share.

Good luck with your stock picks,keep us informed. I'll write if I get round to doing anything. Paul

PrincessB
Posts: 46
Joined: November 10th, 2016, 3:26 pm

Re: I have a plan (of sorts)

Postby PrincessB » November 14th, 2016, 7:41 pm

Hi Paultry,

It's rather great to see some activity on this board, long may it continue.

I've been taking a good look at existing portfolio today, by my own rules, I should be considering selling my Dialight shares as they don't have a yield at present - I shall put that off for another day.

The one that is right for culling is Fenner (FENR) as I'm in profit, the yield has dropped below 2% and they appear to be up thanks to the Trump Bump - I'm hoping for a bit more tomorrow but they shall be consigned.

For the first time in ages, I spent a few hours looking for candidates and came up with three possibilities using Digitallook and a screener with parameters: Market cap > £500 million, Dividend yield > 3%.

First of interest was restaurant group with a decent yield which I considered for a short time. The problem for me is competition, I've just spent a few days in both Exeter and Nottingham and it is clear that there are plenty of independents who are aiming for the big time - While quality varies among these start ups, they are young aggressive and in some cases serving really good food. Above that are the up and coming established restaurants who seem to be opening stores fast.

While any town centre with an astonishing number of places to eat is great for the consumer, I consider that trend to be detrimental to the individual company and so I moved on.

Next to pop onto the radar were KCOM (epic as name) and looking good until I noticed that the CEO who seems very well qualified for his role is 68. I have no issue with this except that my holding period is unlimited and whether he wishes to continue in this role for much longer is debatable. Added to the watch list, but rejected pending further research.

Next up is Morgan advanced Materials (MGAM), the most exciting share I've looked at today.

Many of my buttons are pressed: Youngish CEO - Pete Raby (48) with a decent set of qualifications. Lowish P/E - 12 or so. Decent yield of 4%. Broker forecasts are showing about 10% revenue growth for the next couple of years.

I'm concerned about the debt levels and I need to dig further to convince myself.

I will report back and see if I'm still as happy with them tomorrow.

Regards,

B.

spasmodicus
Posts: 3
Joined: November 6th, 2016, 9:35 am

Re: I have a plan (of sorts)

Postby spasmodicus » November 15th, 2016, 1:07 pm

All,
good point about the importance of spreads in round trip cost!
...Dialight, and was heartened this morning when I saw they were 725p. But the price offered is a mean 697p.....


when I looked just now on H-L the spread was 719.5 - 699.0
on Selftrade it was 715 - 699

Has anyone done any systematic research to see whether the cheaper dealing costs offered by some platforms are effectively offset, or even cancelled out, by bigger spreads?

regards,
S

Paultry
Posts: 16
Joined: November 4th, 2016, 11:09 am

Re: I have a plan (of sorts)

Postby Paultry » November 15th, 2016, 1:38 pm

PB

I bought RTN in March, it was a bargain I thought, but then the 415p I'd paid became 275p. PaulyPilot wrote about it then and went in and out twice as it gained and lost a pound, in April then via Brexit.

The dividend is fine, and it is now gaining publicity for the right reasons, summarised by Questor in the Telegraph on 11th October and rated as a purchase at 350p.

A slightly useful point is that if you are a shareholder (>100) on 1st April then twelve 25% off vouchers come your way to use at any time in their outlets. I don't rate the food, but if you sit on Garfunkel's terrace in Bath on a sunny Saturday afternoon and drink like a fish then it is a welcome discount. And I know the Gourmet card is useful, but generally invalid on weekends.

I shall look forward to the fruits of your digging. But I like your suggestions.

Spasmodicus, I always compare prices in iWEB and Barclaystokbrokers, and they are generally the same. I've often become very interested in a share but if the spread equals or is greater than a year's dividend then I keep away.

Paul

PrincessB
Posts: 46
Joined: November 10th, 2016, 3:26 pm

Re: I have a plan (of sorts)

Postby PrincessB » November 15th, 2016, 5:12 pm

Hi Paultry,

I've been rather busy today so less to report.

We had a surveyor type around yesterday who spent a lot of time using every kind of instrument you can think of to check the structure of the house. Bizarrely one of the wall shelves left by the previous folk decided it was time to part company with the wall at about 2am and dumped an astonishing number of items onto the floor which I've had to tidy in the process of the day.

Anyhow, Morgan Advanced Materials.

Any company finding themselves in value land is deemed to be there for a reason. The question one must ask is whether the reason is valid for the valuation and whether they can dig themselves out of the hole they have found themselves in.

Take GKN, a quick glance at the fundamentals indicate bargain territory until you look at the pension funds two billion quid liability. Hence the valuation, if they can grow as expected this is not a problem, if they stagnate that pension is going to be a time bomb in the background and you don't want to be there when it goes off.

Morgan are a mess, they do all sorts of high tech odds and sods that should command better than the 11% margin they are reporting. The sheer number of industries they address is on the larger side and of course new CEO Pete Raby is going to sort this out by focussing the company on the the stuff that has a decent margin.

This explains the valuation and the yield, no one knows if the he is up to this challenge.

What I like, is that the rules are clear, the company led by the CEO needs to do some things. It needs to sell unproductive sections, it needs to invest in the areas that are most productive in an ever more competitive world, it needs to buy compatible businesses around the world that will complement the company rather than the stamp collecting that appears to have gone on over the last few decades.

I will be the first to admit that I'm not very good at picking apart company reports, hence my concern at the often overlooked pension liabilities. I work on macro trends with a view towards identification of companies who are going to be in the right place at the right time with the strength of a board who have the companies best interests at heart.

In Morgan I see plenty of yum, some areas that are likely to bounce back and the ever present improvements that all industries require in order to meet ever more stringent regulation.

Not a farm bet, but still worthy of consideration.

Regards,

B.

wyndrum
Posts: 10
Joined: November 8th, 2016, 6:45 am

Re: I have a plan (of sorts)

Postby wyndrum » December 7th, 2016, 7:43 am

First thing is, this is a risky business. I am not sure you can even minimise the risk that much but here goes on how I trade.

Trading stocks is gambling. you don't know whats coming. Brokers recommendations don't always help. (In fact rarely)

So this is what works for me. trade big companies preferably ftse 100 but 250 by and large is ok, and occasionally when you think something is afoot smaller 350 market incl Aim

What you may have already noticed or been told is that big companies "the elephants" can't run in other words, big divis small capital moves...No, not really, they can move 2-5% in a day but over the year they give it up or recover, therefore its all about timing.

So I tend to buy 1 week before results/trading updates are due, because this is when the market will be looking at the stock and buying or selling. because we must have volatility and not just volatility but directional volatility ie price moving volatility.

If you buy a big stock the chances are even if the shares go down if you are patient the shares will go back up again so you don't have to cash a loss if you don't want to. (there are exceptions,)

The next bit is up to the individual but I am not mad about diversification. I prefer to bet everything on one or two stocks. Say you have £10k and spend bet £2K on 5 different companies reporting. All 5 might come good but I don't like the dilution of being right on 3 and wrong on 2 and making little or no money over all. But its up to the individual.

So, returns. I think a minimum of at least £5k, pref £10k or more as a betting fund. Approx .5% on costs so I look for between 2-5% return (return on £5k is £100-£250 per week.) Don't be put off by extrapolating this out over the year and being a fantastic return and therefore not achievable, because it is. 1 week at a time.

How do you pick the stocks? This I can't post about because I use my common sense which you might not agree with. But if you go back to the Tesco board at TMF I recently posted about my reasoning on that particular stock at that particular time. At the moment, because it gets leaner on results at this time of year with Xmas I have picked Dixons Carphone last week at 333p but got just plain lucky when a broker buy rec came out later that day. but its 350p ish now and I might get out at 360p or maybe 370-380 as the chart says that's where it is going, but and its a big but, take the money when you have got it. if I have made my target I generally take it.

Does it go wrong, yep and here is another example: I bought Greene King last week or so on the basis that the shares were much lower than their year highs and were doing well but on the last results/update were worried about Brexit, well, as we all know Brexit has not had a detrimental effect so I figured the good progress would continue and the shares would get a bump and remember 2-5% is not that big a deal to happen to a stock on the day.

So at 7:00am I checked the results and hey presto, those magic, magic words. "We have outperformed Market expectations"....but at the end of their best ever results it was caveated with, higher costs going forwards with living wage, apprentice levy, currency, but the company is in good shape to deal with all this. All the market heard was profit warning! so normally I would have licked my wounds and got out but I will hold this one as they will report again in Feb I think, and I would expect a good Xmas trade and if I don't here anything to the contrary will put extra funds on it for that week. So I expect this to recover and see 800p as very realistic.

So very personally I am now playing with about £75k and I would look at retail over the next few weeks because they all report early Jan. I have had a soft spot for SuperGroup and think Jan will be good for them and indeed I am already in with a decent profit but will wait. (1800p looks right to me) So I break some general rules if I think the risk is worth it and that's the bit the individual has to figure out. Whats your selection criteria? what do you want to achieve? what are you comfortable with? Can you withstand the emotion when you loose a £2000 in a week (as I am with GNK at the moment)?

In conclusion this works very well for me and its proved much less difficult then I thought but I have done this for a while and it is gambling so be careful. it works for me but it might not for you so don't take this as advice, just a musing on what I do with some examples, good and bad.

Fatrav
Posts: 38
Joined: November 4th, 2016, 7:15 pm

Re: I have a plan (of sorts)

Postby Fatrav » December 7th, 2016, 11:37 pm

Is there anywhere with a list of stocks and there dividend returns?

PeterBill
Posts: 2
Joined: November 11th, 2016, 5:35 pm

Re: I have a plan (of sorts)

Postby PeterBill » December 8th, 2016, 4:25 am

Here are a couple of links to dividend yields ...

... in the FT100 ....

http://www.dividenddata.co.uk/dividendyield.py?market=&sort=yield&order=1


And the FT250 ...

http://www.dividenddata.co.uk/dividendyield.py?market=ftse250&sort=yield&order=1

http://www.topyields.nl/ftse250-best-dividend-stocks/


It will require further investigation as stocks with an extremely high dividend yield can be caused by a stock price that is extremely low, compared to the trailing twelve months dividend. Or it can be caused by a special, one-time only super dividend.

Could add more links but maximum number of urls allowed is three.

Hope that helps.

wyndrum
Posts: 10
Joined: November 8th, 2016, 6:45 am

Re: I have a plan (of sorts)

Postby wyndrum » December 12th, 2016, 9:47 pm

FWIW I doubled up on DC. today. I have already got a descent profit from the 333p I got in at last week and when it opened around 365 today I was about to sell as I had got a bit more than I expected but thought 370p was coming but it fell all the way back to 353 ish so sold greene king at a loss and put it on DC. The plan will be, sell around 365-380p (it depends on the results Wednesday) and then maybe go back straight away to GNK or possibly DTG (The dart group). They have had a good run and pulled back sharply today on presumably higher oil prices but other airlines did not get hurt so much so as I think 480 or more likely 500p is due soon that would be good too.

Anyway, just thought I would keep you in the picture.

moorfield
Lemon Pip
Posts: 64
Joined: November 7th, 2016, 1:56 pm

Re: I have a plan (of sorts)

Postby moorfield » December 12th, 2016, 10:58 pm

Anyway, just thought I would keep you in the picture.


I bought X at this price and sold Y at that price sounds gibberish to me.

What's your XIRR?

PrincessB
Posts: 46
Joined: November 10th, 2016, 3:26 pm

Re: I have a plan (of sorts)

Postby PrincessB » December 13th, 2016, 3:04 pm

Is there anywhere with a list of stocks and there dividend returns?


The stock screeners on digitallook are free.
http://www.digitallook.com/
They are also rather well hidden, they are in there somewhere.

They offer a couple of screens, a simple one with sliders and the more advanced one which allows you to set a considerable number of parameters.

As an example, a HYP screen would be a simple as selecting companies with a market cap of over £1 Billion and asking for the results to be displayed in order of dividend (highest first).

PYAD used a set of screens for a his value portfolio - If memory serves, he looked for bombed out sectors using Lowest P/E, highest yield and price to book. While the data sets from digitallook are frequently wrong, this kind of quick and dirty screening is a great way of identifying what's hot and what's not.

If I'm being lazy, I screen using the parameters of Market Cap > 50 million and Yield of 2%+ and set the results to display from highest yield downwards.
If I'm feeling energetic, I use the same screen and display for yield ascending - This can take a considerable amount of time as there are loads of great companies within the 2%-3% yield band.

While a screener of this nature is only a first step toward further research, it's a great tool and worth experimenting with.

B.

wyndrum
Posts: 10
Joined: November 8th, 2016, 6:45 am

Re: I have a plan (of sorts)

Postby wyndrum » December 13th, 2016, 8:45 pm

Hi Moorfield,

I am not sure how me telling you what I bought stock for and when I am going to sell is gibberish on a thread called...(wait for it....)
"Trading your way to a million...."

and talking of gibberish what is an"XIRR"?

I explained why I chose the stocks that I do and the timing of such buys. I don't know really what more to say? I trade stocks at a profit mostly and get very good returns.

I thought might be nice to share....you know, Xmas and all...


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