LuniHYP250: Year 8 review

[MDW1954]

Thanks Luni.
Some interesting ideas popping out here: UKW, TEP, APAX and as 88V8 commented, they must be worth a look if they seem good to you.

The Arb's WyfHYP could do with a replacement for her shares in Wood Group, given that I've been thinking of giving up on them. And in any case, she does have lots of cash accrued.


Arb.

I've mentioned UKW here on this board several times, as a quasi-REIT. I started buying them in early 2019. I like the index-linked dividends.

MDW1954

[kempiejon]

Thanks Luni.
Some interesting ideas popping out here: UKW, TEP, APAX and as 88V8 commented, they must be worth a look if they seem good to you.

The Arb's WyfHYP could do with a replacement for her shares in Wood Group, given that I've been thinking of giving up on them. And in any case, she does have lots of cash accrued.


Arb.

As you say Arb nice to see new ideas, I've looked at all three above, I'm undecided on the renewables sector, there's a lot of them it seems. I opted for TRIG The renewables infrastructure group, bigger market cap than UKW.
Apax only made the 5 year rising dividend cut a year or so ago; a good record with an annualised compound dividend growth of 20% over that time. They're another investment gang though and there's a lot of financials about in my holdings.
Telecom Plus much longer history going back 20 odd years, 10 year CAGR of 10% I've bought some in my vaguely HYP mid cap but they have a Multi Level Marketing business model that made me a little wary.

[moorfield]

Thanks Luni.
Some interesting ideas popping out here: UKW, TEP, APAX and as 88V8 commented, they must be worth a look if they seem good to you.

The Arb's WyfHYP could do with a replacement for her shares in Wood Group, given that I've been thinking of giving up on them. And in any case, she does have lots of cash accrued.

A couple more from the 250 which I don't think have been mentioned here yet. (Disclosure, I hold)

DGOC, Gas/Oil producer - 9.4%
DLG, Nonlife Insurance - 7.7%

[kempiejon]

A couple more from the 250 which I don't think have been mentioned here yet. (Disclosure, I hold)

DGOC, Gas/Oil producer - 9.4%
DLG, Nonlife Insurance - 7.7%

If we're sharing 250 ideas, Assura AGR 4% yield is in the health care sector, most of my 250 picks are to look for increasing dividend rather than starting high.

[MDW1954]

A couple more from the 250 which I don't think have been mentioned here yet. (Disclosure, I hold)

DGOC, Gas/Oil producer - 9.4%
DLG, Nonlife Insurance - 7.7%

If we're sharing 250 ideas, Assura AGR 4% yield is in the health care sector, most of my 250 picks are to look for increasing dividend rather than starting high.

Two points: higher up, you mention preferring TRIG to UKW. Back when I was weighing them up, a couple of years ago, I thought TRIG's assets were a fairly motley bunch, and UKW's easier to weigh up, as a pure windpower play. But yes, I can see the attractions of a bigger market cap. Still prefer UKW, though.

Assura: nice business, but PHP is in all respects identical, and whenever I've looked seems to offer the better bargain. But if I didn't own PHP, I'd happily hold Assura. And may well hold both, eventually, as I slip into my dotage.

M

[funduffer]

The renewables infrastructure sector provides quite a few HYP-like companies which provide steadily-rising, high yields.

I own UKW, but I also own NextEnergy Solar Fund (NESF), and GCP Infrastructure (GCP) - a bit of wind, solar and other green things.

I don't include them in my HYP, as I thought they were Investment Trusts? They appear on the AIC website. I include them in my IT portfolio.

Or are they REIT's?

Not bothered either way, nor trying to derail the thread, but just asking!

FD

[idpickering]

The renewables infrastructure sector provides quite a few HYP-like companies which provide steadily-rising, high yields.

I own UKW, but I also own NextEnergy Solar Fund (NESF), and GCP Infrastructure (GCP) - a bit of wind, solar and other green things.

I don't include them in my HYP, as I thought they were Investment Trusts? They appear on the AIC website. I include them in my IT portfolio.

Or are they REIT's?

Not bothered either way, nor trying to derail the thread, but just asking!

FD

Malcom refered to UKW as a quasi-REIT, so that’ll do for me as regards mentioning them as part of an HYP. In fact, the more I think about UKW, the more I like the idea of buying some of their shares tbh.

Ian

[88V8]

..... the more I think about UKW, the more I like the idea of buying some of their shares tbh.

It feels like 'a good thing' but I am very chary of anything that depends on govt subsidies or is subject to regulator interference.
Have sold SSE for that reason, and will at some point be unloading NG as well.

V8

[MDW1954]

The renewables infrastructure sector provides quite a few HYP-like companies which provide steadily-rising, high yields.

I own UKW, but I also own NextEnergy Solar Fund (NESF), and GCP Infrastructure (GCP) - a bit of wind, solar and other green things.

I don't include them in my HYP, as I thought they were Investment Trusts? They appear on the AIC website. I include them in my IT portfolio.

Or are they REIT's?

Not bothered either way, nor trying to derail the thread, but just asking!

FD

This is amply covered by the HYP guidelines, but here goes....

As the guidelines state:

REITs and REIT-like investment companies (e.g. infrastructure companies) are perfectly acceptable.

So there you go.

There is a difference between an investment trust and investment company. Both are covered by the AIC. Think of an investment trust as a company that invests in other (quoted/listed) companies, and an investment company as a company that invests in other non-quoted assets.

MDW1954

[GrahamPlatt]

..... the more I think about UKW, the more I like the idea of buying some of their shares tbh.

It feels like 'a good thing' but I am very chary of anything that depends on govt subsidies or is subject to regulator interference.
Have sold SSE for that reason, and will at some point be unloading NG as well.

V8

Yes, I've been worrying about that re UU. for the past twenty years, NG. for the past ten.

[idpickering]

..... the more I think about UKW, the more I like the idea of buying some of their shares tbh.

It feels like 'a good thing' but I am very chary of anything that depends on govt subsidies or is subject to regulator interference.
Have sold SSE for that reason, and will at some point be unloading NG as well.

V8

Yes, I've been worrying about that re UU. for the past twenty years, NG. for the past ten.

Without wanting to stray to far from the topic of this thread, I hold all three, SSE, UU. and NG. and have done so for some time now. I'm aware of the risks, and accept them, and am happy to continue holding them all in my HYP.

Ian.

[Gengulphus]

The renewables infrastructure sector provides quite a few HYP-like companies which provide steadily-rising, high yields.

I own UKW, but I also own NextEnergy Solar Fund (NESF), and GCP Infrastructure (GCP) - a bit of wind, solar and other green things.

I don't include them in my HYP, as I thought they were Investment Trusts? They appear on the AIC website. I include them in my IT portfolio.

Or are they REIT's?

Not bothered either way, nor trying to derail the thread, but just asking!

I'd suggest checking up on what this board's guidelines say when you're wondering about such things!

The relevant part of them (which has been partially quoted in another reply) is the last bullet in the following:

For the purposes of this board, a HYP approach is one that invests on a Long Term Buy and Hold (LTBH) basis in a diversified portfolio of shares. Those shares should:

• When bought, be among the constituents of the FTSE 350 index.
• When initially bought, have yields greater than the yield of the FTSE 100 index.
• When bought, be reasonably expected to sustain, and preferably grow their dividends in the future.
• Be ordinary shares, not preference shares.
• Not be shares in investment companies or investment trusts which are largely invested in quoted equities. REITs and REIT-like investment companies (e.g. infrastructure companies) are perfectly acceptable.

That bullet's first sentence says "investment companies or investment trusts", so you don't need to worry about the technical distinctions between investment companies and investment trusts, just about whether its main business is owning other investments. You do need to worry about whether it is "largely invested in quoted equities". For instance, UKW is largely invested in wind farms, which generally aren't quoted equities, and REITs are largely invested in real estate, which also generally isn't quoted equities, so they're fine according to the guidelines; many more 'traditional' ITs are largely invested in the stockmarket-quoted shares of other companies, so they're not.

The second sentence of that bullet point ("REITs and REIT-like investment companies (e.g. infrastructure companies) are perfectly acceptable.") is actually just pointing out some examples of investment companies/trusts that are OK by the first sentence - the ones you're most likely to encounter. It's not adding any extra restrictions.

Gengulphus

[funduffer]

..... the more I think about UKW, the more I like the idea of buying some of their shares tbh.

It feels like 'a good thing' but I am very chary of anything that depends on govt subsidies or is subject to regulator interference.
Have sold SSE for that reason, and will at some point be unloading NG as well.

V8

Thanks for the responses on investment trusts v investment companies. I get it now. The former invest in shares, the latter in physical assets, in the case of UKW, wind turbines.

Coming back to UKW, the risks are the cost of electricity and the cost of maintenance. The latter is probably fairly predictable, but anything that rotates in a hostile environment is going to need maintaining regularly! I read something recently about problems with off shore turbines and their cables, so there are probably some maintenance cost unknowns.

In my mind, the real bet is on the price of electricity. Wind and solar may be heading to zero subsidy, but by my reckoning the demand for electricity is going to rise over the next decade or so, so it seems very unlikely that prices will drop, more likely they will rise.

Investing in wind or solar is really a bet on electricity price.

FD

FD

[JuanDB]

This blog post is worth a read for anyone thinking of investing in renewables https://www.finumus.com/blog/dont-invest-in-renewable-energy.

Cheers,

Juan

[MDW1954]

..... the more I think about UKW, the more I like the idea of buying some of their shares tbh.

It feels like 'a good thing' but I am very chary of anything that depends on govt subsidies or is subject to regulator interference.
Have sold SSE for that reason, and will at some point be unloading NG as well.

V8

Coming back to UKW, the risks are the cost of electricity and the cost of maintenance. The latter is probably fairly predictable, but anything that rotates in a hostile environment is going to need maintaining regularly! I read something recently about problems with off shore turbines and their cables, so there are probably some maintenance cost unknowns.

FD

As at 30 December 2020, 70% of the wind turbine portfolio was onshore, not offshore.

MDW1954

[csearle]

As at 30 December 2020, 70% of the wind turbine portfolio was onshore, not offshore.

Fly around Kent and Sussex and you could be forgiven for thinking otherwise! C.

[Gengulphus]

Thanks for the responses on investment trusts v investment companies. I get it now. The former invest in shares, the latter in physical assets, in the case of UKW, wind turbines.

Sorry, but no, you don't seem to get it about the difference between investment trusts and investment companies. Greencoat UK Wind PLC (UKW) is an investment trust. Specifically, if you download its 2020 annual report (*) and turn to page 31, you will find the following:

Investment Trust Status
The Company has been approved as an investment
trust under sections 1158 and 1159 of the Corporation
Taxes Act 2010. As an investment trust, the Company
is required to meet relevant eligibility conditions and
ongoing requirements. In particular, the Company
must not retain more than 15 per cent of its eligible
investment income. The Company has conducted and
monitored its affairs so as to enable it to comply with
these requirements.

So UKW doesn't match up to your idea that investment trusts invest in shares and investment companies invest in physical assets...

What this board's guidance cares about is that the companies a HYP invests in should not be companies whose main business is managing investments in quoted shares for the company's own benefit (**). Their main business can be something other than managing investments, such as running supermarkets, making tobacco products, providing bank accounts, developing and manufacturing pharmaceuticals, or many other things: those companies are all neither investment companies nor investment trusts. Or their main business can be managing investments for the company's own benefit, and that's also OK by the guidelines, as long as the investments are not largely quoted shares: they can be all sorts of things, such as real estate, infrastructure projects, art, stamps, gold, even unquoted shares - just not quoted shares (though in practice, most of the possibilities aren't going to generate enough earnings to fuel the dividends a HYPer is looking for, so only real estate and infrastructure projects come up at all often as HYP candidates). As far as I am aware, all of those companies might in principle be either investment companies or investment trusts - it's a matter of the company's legal status (as indicated by the "under sections 1158 and 1159 of the Corporation Taxes Act 2010" part of the above quote) - but which of the two a company is simply isn't something the guidelines care about. So the legal distinction between an investment company and an investment trust quite simply isn't something one needs to know as a HYPer wanting to comply with the guidelines when posting to this board - which incidentally is something I'm heartily glad of, because I don't know that legal distinction! All one needs to know is whether the company's main business is managing investments for its own benefit, and if so, whether those investments are largely quoted shares.

In short, the thing you need to 'get' about this is not what the difference between investment companies and investment trusts is, but that you don't need to know what that difference is.

(*) Which is at https://www.greencoat-ukwind.com/~/medi ... 0Final.pdf, though you may well have to find your way through some disclaimers to get to the actual report.

(**) Asset managers who charge management fees to manage other people's or organisations' portfolios of quoted shares for them are different (they get their management fees whether the portfolios they're managing go up or down in value) and are fine by the guidelines.

Gengulphus

[kempiejon]

A couple more from the 250 which I don't think have been mentioned here yet. (Disclosure, I hold)

DGOC, Gas/Oil producer - 9.4%
DLG, Nonlife Insurance - 7.7%

If we're sharing 250 ideas, Assura AGR 4% yield is in the health care sector, most of my 250 picks are to look for increasing dividend rather than starting high.

Two points: higher up, you mention preferring TRIG to UKW. Back when I was weighing them up, a couple of years ago, I thought TRIG's assets were a fairly motley bunch, and UKW's easier to weigh up, as a pure windpower play. But yes, I can see the attractions of a bigger market cap. Still prefer UKW, though.

Assura: nice business, but PHP is in all respects identical, and whenever I've looked seems to offer the better bargain. But if I didn't own PHP, I'd happily hold Assura. And may well hold both, eventually, as I slip into my dotage.

M

You know I had the idea that TRIG was the higher yielder but there doesn't look like there's been much in it so it must have seen size that swung it, UKW does appear to have grown the income a bit faster< I have subsequently looked at JLEN in the sector too. PHP I've not investigated, having had a quick peer at dividenddata I see they have the better yield and much better looking long-term dividend history.

[MDW1954]

..... the more I think about UKW, the more I like the idea of buying some of their shares tbh.

It feels like 'a good thing' but I am very chary of anything that depends on govt subsidies or is subject to regulator interference.
Have sold SSE for that reason, and will at some point be unloading NG as well.

V8

Thanks for the responses on investment trusts v investment companies. I get it now. The former invest in shares, the latter in physical assets, in the case of UKW, wind turbines.

FD

As Gengulphus has explained, it's more complicated than that. Which is why I condensed my earlier reply to the single one-sentence quote from the guidelines that I included: it was all that you needed to know to resolve your dilemma.

Just focus on that and you'll be OK.

MDW1954

[moorfield]

Have sold SSE for that reason, and will at some point be unloading NG as well.

Yet on the other hand these two along with the likes of UKW and FSFL will be leading the UK's charge to reach net zero emissions by 2050. Swings and roundabouts. I'll have your shares please, if you have any more to unload?