Arb HYP adjustment

[Arborbridge]

... HYP is an unusual and relatively high risk policy since it encourages slicing winners and backing those which have fallen.

Arb.

No, it doesn't -- as a matter of policy -- encourage slicing winners at all.

Some here might choose to do that, but many more don't. I don't believe that I have ever "sliced a winner", and I've been a regular on TMF's and TLF's HYP boards since 2005.

MDW1954

Well, I should have been more exact and used some wording such as "HYP as she is practiced by some". That was a silent given Clearly an original HYP did not have top slicing as one of the safety features suggested by later practictioners, but one might also say that HYP as defined on the Lemon Fool isn't that same as the original HYP in any case. But given that top slicing etc is common currency amongst HYPers, I think my statement is still true.

I guess you are saying that your policy is not to top slice shares - however big they get? Or maybe you have some limit but no share has reached it. In truth, my shares rarely reach my limits eaither, but it does happen occasionally.

In a wider sense, HYP does what I said: when you add to tour shares, you buy high yielding shares and dismiss low yielding shares. The safety factors notwithstanding, this tends to be shares which have fallen in price and thus offer a "bargain", not those which have risen in price such as Diageo.

It's a high risk investment policy which relies on its safety factors to mitigate the risks.

Arb.

[MDW1954]

... HYP is an unusual and relatively high risk policy since it encourages slicing winners and backing those which have fallen.

No, it doesn't -- as a matter of policy -- encourage slicing winners at all.

Some here might choose to do that, but many more don't.

I don't believe that I have ever "sliced a winner", and I've been a regular on TMF's and TLF's HYP boards since 2005.

I just hope no-one is impolite enough to ask if you"ve actually had any!!

:O)

Cheers,

Itsallaguess

Greggs up 610% since 2013, ie (current price minus bought cost = 610%).

The defence rests, m'lud.

MDW1954

[MDW1954]

I guess you are saying that your policy is not to top slice shares - however big they get? Or maybe you have some limit but no share has reached it. In truth, my shares rarely reach my limits either, but it does happen occasionally.


Arb.

I don't top-slice, period. See my reply to IAAG re: Greggs -- that gain would surely breach a self-imposed limit, if I had such. But I don't.

MDW1954

[moorfield]

, but one might also say that HYP as defined on the Lemon Fool isn't that same as the original HYP in any case.

I think that's it in a nutshell. Stephen Bland's acronym has been misappropriated a long time ago (imo, only he can really opine on that I suppose), what we have here is "based on a true story", as films might put it.

[Itsallaguess]

I guess you are saying that your policy is not to top slice shares - however big they get? Or maybe you have some limit but no share has reached it. In truth, my shares rarely reach my limits either, but it does happen occasionally.

I don't top-slice, period. See my reply to IAAG re: Greggs - up 610% since 2013, ie (current price minus bought cost = 610%) -- that gain would surely breach a self-imposed limit, if I had such. But I don't.

Well done on Greggs - I had no doubt at all that you'd have such holdings, hence the smiley...

Regarding the details on the Greggs 'gains' though - I'm not sure that quite covers the topic being discussed adequately, because as far as I'm aware any potential top-slicing would normally be with regards to comparative 'over-weight' situations associated with capital or income, or even both, so without knowing what percentage weighting in capital and income-delivering terms Greggs currently enjoys within your overall portfolio, it's difficult to talk about 'limits' at all really.

Simply put - we don't know how the rest of your portfolio has done, and so if all holdings were bought on equal weightings to start with, and they'd *all* gone up 610%, then whilst you'd be enjoying fantastic returns, everything would still be equal-weighted....

With regards to top-slicing in general, I think it's one of those situations best aligned with Mike Tyson's famous remark, that everyone has a plan until they're punched in the face...

Similarly, I'd perhaps suggest that even those that would normally advocate not top-slicing, perhaps might change their views were they to own HYP1 - https://www.lemonfool.co.uk/viewtopic.php?t=26214

Cheers,

Itsallaguess

[funduffer]

... HYP is an unusual and relatively high risk policy since it encourages slicing winners and backing those which have fallen.

Arb.

No, it doesn't -- as a matter of policy -- encourage slicing winners at all.

Some here might choose to do that, but many more don't. I don't believe that I have ever "sliced a winner", and I've been a regular on TMF's and TLF's HYP boards since 2005.

MDW1954

I think the trigger for any top HYP slicing can vary from person to person - from 'never' to when quite narrow criteria are met.

I am nearer MDW's end of the spectrum, having only top-sliced once in 7 years, and that was when GSK reached 25% of my portfolio. I am happy to let things evolve naturally unless there becomes a gross un-balance.

FD

[MDW1954]

Well done on Greggs - I had no doubt at all that you'd have such holdings, hence the smiley...

Regarding the details on the Greggs 'gains' though - I'm not sure that quite covers the topic being discussed adequately, because as far as I'm aware any potential top-slicing would normally be with regards to comparative 'over-weight' situations associated with capital or income, or even both, so without knowing what percentage weighting in capital and income-delivering terms Greggs currently enjoys within your overall portfolio, it's difficult to talk about 'limits' at all really.

Simply put - we don't know how the rest of your portfolio has done, and so if all holdings were bought on equal weightings to start with, and they'd *all* gone up 610%, then whilst you'd be enjoying fantastic returns, everything would still be equal-weighted....

Itsallaguess

Obviously, your points are very valid. But as practised on this board, references to being over-weight in terms of capital or income generally apply to decisions as to whether or not to top-up a share. What Arb was saying, and what TJH does, is different: top-slicing (ie reducing a holding) as opposed to buying more (or not) on grounds of over-weightedness.

Equally, no top-slicers address the flipside of top-slicing: having top-sliced a share where the share price has risen, do you then buy it back when the share price falls back? TJH may do that, albeit perhaps not consciously, as a result of his methodology -- I have no idea, and I don't pretend to be an expert on his methodology or practices.

I am very well aware of the opportunity cost of not top-slicing (potentially foregone additional income), and also potential profit if the suggestion in the paragraph above is practised. But HYPing is supposed to be easy and effortless, and I'm too lazy for all this activity.

MDW1954

[Arborbridge]

Obviously, your points are very valid. But as practised on this board, references to being over-weight in terms of capital or income generally apply to decisions as to whether or not to top-up a share. What Arb was saying, and what TJH does, is different: top-slicing (ie reducing a holding) as opposed to buying more (or not) on grounds of over-weightedness.

Equally, no top-slicers address the flipside of top-slicing: having top-sliced a share where the share price has risen, do you then buy it back when the share price falls back? TJH may do that, albeit perhaps not consciously, as a result of his methodology -- I have no idea, and I don't pretend to be an expert on his methodology or practices.

I am very well aware of the opportunity cost of not top-slicing (potentially foregone additional income), and also potential profit if the suggestion in the paragraph above is practised. But HYPing is supposed to be easy and effortless, and I'm too lazy for all this activity.

MDW1954

Having top sliced, I use the normal procedures and "rules" to re-invest in another share - generally that would be one near the top of the table. Nothing mysterious about it, but if I can sense there's a problem in what I might invest it next, it would certainly put me off making the top-slice anyway.

And I concur with your final sentence. HYP can become too much effort if we apply all the bells and whistles this group has invented. That's one reason I expanded my top-slice criterion to 2x median capital weight - that cuts down enormously on the number of potential events, as does tolerance over the yield criteria*. These are all things we can play about with at will to make life easier - and some are quite happy without any of it!

*just one this year - BHP was getting quite large and in any case I wanted to recycle some into RIO. That seemed to me a good way of balancing company specific risk.
(ADM, of course, is a potential trim, but not actioned)

Arb.

[moorfield]

Similarly, I'd perhaps suggest that even those that would normally advocate not top-slicing, perhaps might change their views were they to own HYP1 - https://www.lemonfool.co.uk/viewtopic.php?t=26214

The owner of HYP1 has already made it perfectly clear, numerous times, that he doesn't advocate top-slicing, so he won't be changing his view. Yes, HYP1 has clearly allowed concentration risk to manifest itself, but such risk was highlighted in the Retirement pays Dividends article:

I wish to stress, though, that anybody considering this approach must be made aware that there are risks. Neither the income nor the capital is guaranteed.

Instead perhaps one should suggest that:

If you cannot live with that then, clearly, don't do it.


Which of course a lot of contributors here clearly can't, and don't.

A misappropriated acronym, as I wrote above. Time for a new acronym?

[Wizard]

Well done on Greggs - I had no doubt at all that you'd have such holdings, hence the smiley...

Regarding the details on the Greggs 'gains' though - I'm not sure that quite covers the topic being discussed adequately, because as far as I'm aware any potential top-slicing would normally be with regards to comparative 'over-weight' situations associated with capital or income, or even both, so without knowing what percentage weighting in capital and income-delivering terms Greggs currently enjoys within your overall portfolio, it's difficult to talk about 'limits' at all really.

Simply put - we don't know how the rest of your portfolio has done, and so if all holdings were bought on equal weightings to start with, and they'd *all* gone up 610%, then whilst you'd be enjoying fantastic returns, everything would still be equal-weighted....

Itsallaguess

Obviously, your points are very valid. But as practised on this board, references to being over-weight in terms of capital or income generally apply to decisions as to whether or not to top-up a share. What Arb was saying, and what TJH does, is different: top-slicing (ie reducing a holding) as opposed to buying more (or not) on grounds of over-weightedness.

Equally, no top-slicers address the flipside of top-slicing: having top-sliced a share where the share price has risen, do you then buy it back when the share price falls back? TJH may do that, albeit perhaps not consciously, as a result of his methodology -- I have no idea, and I don't pretend to be an expert on his methodology or practices.

I am very well aware of the opportunity cost of not top-slicing (potentially foregone additional income), and also potential profit if the suggestion in the paragraph above is practised. But HYPing is supposed to be easy and effortless, and I'm too lazy for all this activity.

MDW1954

My bold.

But surely the originally HYP was a one off purchase, so there was no regular rebalancing by means of top ups? Has PYAD ever constructed a portfolio that has not followed that approach? The only time reinvestment decisions would arise in PYAD's portfolios is if a company held in the HYP is bought out for cash. As has often been said, if this board was about 'pure' or 'original' HYP the board would have virtually no posts. Presumably that is, at least in part, why PYAD's posts are so few and far between.

[Gengulphus]

, but one might also say that HYP as defined on the Lemon Fool isn't that same as the original HYP in any case.

I think that's it in a nutshell. Stephen Bland's acronym has been misappropriated a long time ago (imo, only he can really opine on that I suppose), what we have here is "based on a true story", as films might put it.

The origin of that acronym are the "P/E, Yield, Assets, Debt" set of four tests that he used for his Value strategy on TMF. Those tests were (from https://web.archive.org/web/20000421043 ... 00&sort=id):

Q. What does PYAD stand for?
A. P/E - under 2/3 all share. Yield - more than 50% of all share
Assets - greater than share price (nowdays PTB<1). Debt - preferably none

His Value strategy required a share to pass all four of those tests, which only happened pretty rarely - it was unusual for even one share in the market to pass all four of them, and very unusual indeed for more than one share to do so. And the strategy was basically to wait for one to do so and to show some indication that the share price was likely to rise reasonably soon (the same link mentions a sharp rise in the forecast EPS for the coming year as a common one), then 'bet the farm' on that share - i.e. buy it with all the cash available, which was usually the entire value of the portfolio. Then wait for the perceived value of the share to 'out', hopefully by the price rising and the tests no longer passing (he mentioned on a few occasions that dropping down to just two of the tests passing was a plausible point at which to judge that that had happened), but sometimes because news from the company indicated worsening earnings, dividends, assets and/or debt. And when the perceived value had 'outed', don't hesitate to sell: it was a preferably-short-term trading strategy aimed at making capital gains, which used yield as one of its indicators of the value in a share, not an LTBH strategy aimed at receiving dividend income.

So basically, the strategy his acronym was invented for was one that differed greatly from any HYP strategy. And so it's very arguable that by retaining his username when he was discussing HYP strategies, Stephen Bland himself misappropriated the acronym! ;-)

Gengulphus

[Arborbridge]

, but one might also say that HYP as defined on the Lemon Fool isn't that same as the original HYP in any case.

I think that's it in a nutshell. Stephen Bland's acronym has been misappropriated a long time ago (imo, only he can really opine on that I suppose), what we have here is "based on a true story", as films might put it.

The origin of that acronym are the "P/E, Yield, Assets, Debt" set of four tests that he used for his Value strategy on TMF. Those tests were (from https://web.archive.org/web/20000421043 ... 00&sort=id):

I took Stephen Bland's acronym to refer to HYP. It was the acronym he adopted for his portfolio technique, so could equally be Stephen Bland's acronym.

Arb.

[MDW1954]

I took Stephen Bland's acronym to refer to HYP. It was the acronym he adopted for his portfolio technique, so could equally be Stephen Bland's acronym.

Arb.

That is how I had read it, too.

MDW1954

[Wizard]

I took Stephen Bland's acronym to refer to HYP. It was the acronym he adopted for his portfolio technique, so could equally be Stephen Bland's acronym.

Arb.

That is how I had read it, too.

MDW1954

Yup, G completely missed the point of the post he replied to. Hope it didn't take him too long to type his lengthy reply

[csearle]

I took Stephen Bland's acronym to refer to HYP. It was the acronym he adopted for his portfolio technique, so could equally be Stephen Bland's acronym.

I didn't. In my opinion/recollection pyad was conceived, just as Gengulphus detailed, and was the essence of Stephen's Value strategy. His (later) HYP concept was a subset of his value concept as inspired by our suitably immortalised Doris. C.

[Arborbridge]

I took Stephen Bland's acronym to refer to HYP. It was the acronym he adopted for his portfolio technique, so could equally be Stephen Bland's acronym.

I didn't. In my opinion/recollection pyad was conceived, just as Gengulphus detailed, and was the essence of Stephen's Value strategy. His (later) HYP concept was a subset of his value concept as inspired by our suitably immortalised Doris. C.

That's correct. No one has disputed that.
The point at issue here was what was meant by "Stephen Bland's acronym" when it was referred to in this thread. The acronym referred to was "HYP" not "PYAD".

You and Gen both took it to mean Pyad, when it actually referred to HYP. That just shows how ambiguous text messages can be at times

Arb.

[moorfield]

Has PYAD ever constructed a portfolio that has not followed that approach? The only time reinvestment decisions would arise in PYAD's portfolios is if a company held in the HYP is bought out for cash.

Wizard there was an article called "HYPersavers" aimed at "builders" which addresses your question I think and suggests using the average holding value. This is the approach I use with my portfolio to counter imbalance over time. I've always been suspicious that routine top slicing (medianic or otherwise) accrues costs to the "builder" that do not need to be accrued over a 5-10+ year timeframe of reinvesting dividends. I can see the merit of top slicing for the "spender", but (imo) ... well, I won't labour the view again I've already expressed here.


https://web.archive.org/web/20071231131 ... avers.aspx

[Itsallaguess]

I've always been suspicious that routine top slicing (medianic or otherwise) accrues costs to the "builder" that simply do not need to be accrued over a 5-10+ year timeframe.

The majority of the top-slicing or selling I've done over the years with regards to single-share HYP holdings have largely been done on the capital side, where share-price rises have got well ahead of associated dividend-payments, which of course leads to lower current-yields, so where such capital imbalances were to then 'pop-up' on my portfolio-weighting metrics, the solution to the capital-imbalance issue almost always provided an underlying boost to the income that slice of capital was delivering within the portfolio as well, which, as an income-portfolio 'builder', suited me very well.

Although those types of opportunities only seemed to crop up every few years, they often provide a chance to give a useful boost to underlying portfolio-income, so over your '5-10+ year timeframe', I see such fairly irregular broker-interactions as being worthwhile..

I should add that I've got fairly wide over-weighting windows to help avoid too much potential for regular 'out/in/out' processes, as I'd personally rather live with a wider weighting spectrum than faff about with too many broker-interactions, and again, that's worked out really well over the years...

Cheers,

Itsallaguess

[moorfield]

The majority of the top-slicing or selling I've done over the years with regards to single-share HYP holdings have largely been done on the capital side,

Tut tut.

[tjh290633]

I guess you are saying that your policy is not to top slice shares - however big they get? Or maybe you have some limit but no share has reached it. In truth, my shares rarely reach my limits either, but it does happen occasionally.


Arb.

I don't top-slice, period. See my reply to IAAG re: Greggs -- that gain would surely breach a self-imposed limit, if I had such. But I don't.

MDW1954

The limit might not have been breached, because it depends on how the rest of the portfolio has performed.

There is a comment about whether top slicing can lead to later reinvestment of dividend income into that same share. Most definitely it can, and I have numerous examples of shares that have had both. IMB and AZN are two examples, both oddly dating from demergers of Hanson and ICI respectively in the 1990s. Another is IMI. Again split out of ICI, but my present holding was bought more recently. A few weeks ago it was knocking on the door of top slicing, but then stayed steady while all around marched forward. I set my limit at 1.5 times median weight after periods at twice the median and 10% because it suited me. At twice the median, I would have faced the question each time, do I add another holding? With 35 holdings I have no wish to proliferate, and I would have had to pick up to 5 shares to top up.

Just my funny little way.

TJH