IDP's HYP as of 20 May 21.

[MDW1954]

Personally, I don't think I've had that much experience of 'placings', so this discussion is interesting and informative imho. Overall, it might even sway me as to whether I should invest in the likes of these companies at all?

Ian.

Ian,

You've probably had exposure to institutional placings but not noticed them, because they don't require ordinary investors to do anything.

What you will find is that the likes of BBOX, LXI, UKW et al do 'open offers', sometimes alongside a placing, and these open offers usually are available to ordinary shareholders.

They use the funds to buy more warehouses, doctors' surgeries, wind farms or whatever.

MDW1954

[idpickering]

One thing with acquiring more windfarms is that it increases the chances of something going wrong with one of them, but OTOH it reduces the effect of such an event on the whole company.

Yes in that sense it is a bit like an investment portfolio. I am not sure (in fact I have no idea) what factors would come into play in buying a windfarm anyway. I suppose the exposure to wind itself is that main one.

Dod

Wind is abundant up here in Orkney! Personally, I wouldn't be without our wind turbine. Overall, our utility bills have been halved when compared with what we were paying in Nottinghamshire. However, we have our own private toilet waste system, and water supply, so that helps. The downside being, the risks are all ours, as I found out a month ago when we had to pay out £850 for a new water pump to be fitted. We have our own 300 foot deep bore hole.We don't own the turbine though I should add, though we benefit from it as the electrics for it are in our porch! It's a different World here.

Ian.

[Arborbridge]

One thing with acquiring more windfarms is that it increases the chances of something going wrong with one of them, but OTOH it reduces the effect of such an event on the whole company.

Yes in that sense it is a bit like an investment portfolio. I am not sure (in fact I have no idea) what factors would come into play in buying a windfarm anyway. I suppose the exposure to wind itself is that main one.

Dod

I think you might be a little biassed as you've already said you hate the things! But buying more does spread the risk - as you say - like having a bigger portfolio of shares.

The major concern (like many industries) would be the lifetime of hugely expensive capital items. A bit like buying a railroad - there is not only capital outlay and replacement costs but continual maintenance. Presumably, like any other industrial share, this is all baked into the price somehow.

Warren Buffett didn't like investments like that when he said that if you are going to buy something with huge up front costs, you had better be certain of the payoff down the road. After saying he didn't like railways for that reason (amongst others) - he then bought one!
Arb.

[Gengulphus]

And that is one of the disadvantages of a Placing. At least in the short term it is going to have a depressing effect on the share price. It also of course produces more mouths for the dividend to feed and so reduces the dividend per share.

No - it produces more mouths to feed and it funds an increased food supply. Whether that increases the dividend per share, decreases it or leaves it unchanged depends on the exact numbers - the percentage by which the placing increased shares in issue, and the percentage by which the funds raised by the placing increased earnings or free cash flow (take your pick).

And if one looks at a long-term share price graph (well, as long-term as it gets for UKW) such as https://www.londonstockexchange.com/sto ... mpany-page with the timescale set to "Max", UKW's share price generally rose gradually from flotation in 2013 to the end of 2019, and since then has generally fallen gradually (apart from a very short-term big spike downwards in March 2020, which is only visible at the higher-resolution "5 years" timescale). Searching https://investegate.co.uk/CompData.aspx ... s&limit=-1 for the word "placing" shows that the company has done placings on seven occasions over those eight years, in February 2015, November 2015, May 2018, February 2019, May 2019, September 2020 and February 2021. That's five placings in about 6.75 years of generally rising share prices and two in about 1.5 years of generally falling share prices - which is distributed about as proportionally to the time periods as possible, given that placings only come in whole numbers... So I don't see any clear evidence about placings being associated either with share price falls or share price rises there.

Of course, that's a pretty long-term view, and I do realise that you said "At least in the short term ...". But for a HYPer, short-term depressing effects on the share price are buying opportunities - or at least, they would be if we could distinguish them at the time (rather than just with hindsight) from long-term depressing effects on share prices...

Gengulphus

[MDW1954]

And that is one of the disadvantages of a Placing. At least in the short term it is going to have a depressing effect on the share price. It also of course produces more mouths for the dividend to feed and so reduces the dividend per share.

No - it produces more mouths to feed and it funds an increased food supply. Whether that increases the dividend per share, decreases it or leaves it unchanged depends on the exact numbers - the percentage by which the placing increased shares in issue, and the percentage by which the funds raised by the placing increased earnings or free cash flow (take your pick).

And if one looks at a long-term share price graph (well, as long-term as it gets for UKW) such as https://www.londonstockexchange.com/sto ... mpany-page with the timescale set to "Max", UKW's share price generally rose gradually from flotation in 2013 to the end of 2019, and since then has generally fallen gradually (apart from a very short-term big spike downwards in March 2020, which is only visible at the higher-resolution "5 years" timescale). Searching https://investegate.co.uk/CompData.aspx ... s&limit=-1 for the word "placing" shows that the company has done placings on seven occasions over those eight years, in February 2015, November 2015, May 2018, February 2019, May 2019, September 2020 and February 2021. That's five placings in about 6.75 years of generally rising share prices and two in about 1.5 years of generally falling share prices - which is distributed about as proportionally to the time periods as possible, given that placings only come in whole numbers... So I don't see any clear evidence about placings being associated either with share price falls or share price rises there.

Of course, that's a pretty long-term view, and I do realise that you said "At least in the short term ...". But for a HYPer, short-term depressing effects on the share price are buying opportunities - or at least, they would be if we could distinguish them at the time (rather than just with hindsight) from long-term depressing effects on share prices...

Gengulphus

Gengulphus,

I too took issue with Dod's words, but decided it could have been down to inaccurate wording, and let it drop. But let's pursue it, anyway, seeing that you have.

As you say, Dod wrote:

And that is one of the disadvantages of a Placing. At least in the short term it is going to have a depressing effect on the share price. It also of course produces more mouths for the dividend to feed and so reduces the dividend per share.

I won't comment on the second sentence. The third sentence, though, baldly and axiomatically states that the dividend per share will fall.

But will it? If, as is usually the case, more income-earning assets are being acquired with the funds, then, ceteris paribus, the additional income will pay for the dividend for the additional shareholders.

That's once those assets have been acquired, though. And once the earned income has been received. So in the short term, dividend cover will certainly fall, until that happens. I believe that I've yet to see actual dividends fall, though. And I've been doing this long enough to be reasonably certain that if this was an axiomatic consequence, I would have experienced it by now.

MDW1954

[Dod101]

And that is one of the disadvantages of a Placing. At least in the short term it is going to have a depressing effect on the share price. It also of course produces more mouths for the dividend to feed and so reduces the dividend per share.

No - it produces more mouths to feed and it funds an increased food supply. Whether that increases the dividend per share, decreases it or leaves it unchanged depends on the exact numbers - the percentage by which the placing increased shares in issue, and the percentage by which the funds raised by the placing increased earnings or free cash flow (take your pick).

And if one looks at a long-term share price graph (well, as long-term as it gets for UKW) such as https://www.londonstockexchange.com/sto ... mpany-page with the timescale set to "Max", UKW's share price generally rose gradually from flotation in 2013 to the end of 2019, and since then has generally fallen gradually (apart from a very short-term big spike downwards in March 2020, which is only visible at the higher-resolution "5 years" timescale). Searching https://investegate.co.uk/CompData.aspx ... s&limit=-1 for the word "placing" shows that the company has done placings on seven occasions over those eight years, in February 2015, November 2015, May 2018, February 2019, May 2019, September 2020 and February 2021. That's five placings in about 6.75 years of generally rising share prices and two in about 1.5 years of generally falling share prices - which is distributed about as proportionally to the time periods as possible, given that placings only come in whole numbers... So I don't see any clear evidence about placings being associated either with share price falls or share price rises there.

Of course, that's a pretty long-term view, and I do realise that you said "At least in the short term ...". But for a HYPer, short-term depressing effects on the share price are buying opportunities - or at least, they would be if we could distinguish them at the time (rather than just with hindsight) from long-term depressing effects on share prices...

Gengulphus

Thanks for at least acknowledging the short term effect. At best though the 'increased food supply' to feed the increase in the number of mouths is probably going to be neutral for continuing shareholders. So where is the benefit to the continuing shareholders? That is what I mean by dilution effect.

Dod

[Dod101]

And that is one of the disadvantages of a Placing. At least in the short term it is going to have a depressing effect on the share price. It also of course produces more mouths for the dividend to feed and so reduces the dividend per share.

No - it produces more mouths to feed and it funds an increased food supply. Whether that increases the dividend per share, decreases it or leaves it unchanged depends on the exact numbers - the percentage by which the placing increased shares in issue, and the percentage by which the funds raised by the placing increased earnings or free cash flow (take your pick).

And if one looks at a long-term share price graph (well, as long-term as it gets for UKW) such as https://www.londonstockexchange.com/sto ... mpany-page with the timescale set to "Max", UKW's share price generally rose gradually from flotation in 2013 to the end of 2019, and since then has generally fallen gradually (apart from a very short-term big spike downwards in March 2020, which is only visible at the higher-resolution "5 years" timescale). Searching https://investegate.co.uk/CompData.aspx ... s&limit=-1 for the word "placing" shows that the company has done placings on seven occasions over those eight years, in February 2015, November 2015, May 2018, February 2019, May 2019, September 2020 and February 2021. That's five placings in about 6.75 years of generally rising share prices and two in about 1.5 years of generally falling share prices - which is distributed about as proportionally to the time periods as possible, given that placings only come in whole numbers... So I don't see any clear evidence about placings being associated either with share price falls or share price rises there.

Of course, that's a pretty long-term view, and I do realise that you said "At least in the short term ...". But for a HYPer, short-term depressing effects on the share price are buying opportunities - or at least, they would be if we could distinguish them at the time (rather than just with hindsight) from long-term depressing effects on share prices...

Gengulphus

Gengulphus,

I too took issue with Dod's words, but decided it could have been down to inaccurate wording, and let it drop. But let's pursue it, anyway, seeing that you have.

As you say, Dod wrote:

And that is one of the disadvantages of a Placing. At least in the short term it is going to have a depressing effect on the share price. It also of course produces more mouths for the dividend to feed and so reduces the dividend per share.

I won't comment on the second sentence. The third sentence, though, baldly and axiomatically states that the dividend per share will fall.

But will it? If, as is usually the case, more income-earning assets are being acquired with the funds, then, ceteris paribus, the additional income will pay for the dividend for the additional shareholders.

That's once those assets have been acquired, though. And once the earned income has been received. So in the short term, dividend cover will certainly fall, until that happens. I believe that I've yet to see actual dividends fall, though. And I've been doing this long enough to be reasonably certain that if this was an axiomatic consequence, I would have experienced it by now.

MDW1954

But what you have not experienced is the result had the Placing not happened. It may well have been that the existing assets would have produced an increase in earnings and so increased your dividend beyond what has actually happened. I did not say that dividends would have fallen as a result of the new shares being sold. That I am sure is something that the Directors would ensure did not happen. If that is your goal then you will be satisfied but you cannot know any more than I do what would have happened if the new assets were not acquired. Dividends usually increase because the number of shares in issue remains unchanged when profits in the company increase. That is not what happens with UKW and probably many of these companies which like keeping raising new capital. That is why I say it is of real benefit to the managers but I am not at all sire that it benefits the shareholder.

Dod

[MDW1954]

No - it produces more mouths to feed and it funds an increased food supply. Whether that increases the dividend per share, decreases it or leaves it unchanged depends on the exact numbers - the percentage by which the placing increased shares in issue, and the percentage by which the funds raised by the placing increased earnings or free cash flow (take your pick).

And if one looks at a long-term share price graph (well, as long-term as it gets for UKW) such as https://www.londonstockexchange.com/sto ... mpany-page with the timescale set to "Max", UKW's share price generally rose gradually from flotation in 2013 to the end of 2019, and since then has generally fallen gradually (apart from a very short-term big spike downwards in March 2020, which is only visible at the higher-resolution "5 years" timescale). Searching https://investegate.co.uk/CompData.aspx ... s&limit=-1 for the word "placing" shows that the company has done placings on seven occasions over those eight years, in February 2015, November 2015, May 2018, February 2019, May 2019, September 2020 and February 2021. That's five placings in about 6.75 years of generally rising share prices and two in about 1.5 years of generally falling share prices - which is distributed about as proportionally to the time periods as possible, given that placings only come in whole numbers... So I don't see any clear evidence about placings being associated either with share price falls or share price rises there.

Of course, that's a pretty long-term view, and I do realise that you said "At least in the short term ...". But for a HYPer, short-term depressing effects on the share price are buying opportunities - or at least, they would be if we could distinguish them at the time (rather than just with hindsight) from long-term depressing effects on share prices...

Gengulphus

Gengulphus,

I too took issue with Dod's words, but decided it could have been down to inaccurate wording, and let it drop. But let's pursue it, anyway, seeing that you have.

As you say, Dod wrote:

And that is one of the disadvantages of a Placing. At least in the short term it is going to have a depressing effect on the share price. It also of course produces more mouths for the dividend to feed and so reduces the dividend per share.

I won't comment on the second sentence. The third sentence, though, baldly and axiomatically states that the dividend per share will fall.

But will it? If, as is usually the case, more income-earning assets are being acquired with the funds, then, ceteris paribus, the additional income will pay for the dividend for the additional shareholders.

That's once those assets have been acquired, though. And once the earned income has been received. So in the short term, dividend cover will certainly fall, until that happens. I believe that I've yet to see actual dividends fall, though. And I've been doing this long enough to be reasonably certain that if this was an axiomatic consequence, I would have experienced it by now.

MDW1954

But what you have not experienced is the result had the Placing not happened. It may well have been that the existing assets would have produced an increase in earnings and so increased your dividend beyond what has actually happened. I did not say that dividends would have fallen as a result of the new shares being sold. That I am sure is something that the Directors would ensure did not happen. If that is your goal then you will be satisfied but you cannot know any more than I do what would have happened if the new assets were not acquired. Dividends usually increase because the number of shares in issue remains unchanged when profits in the company increase. That is not what happens with UKW and probably many of these companies which like keeping raising new capital. That is why I say it is of real benefit to the managers but I am not at all sire that it benefits the shareholder.

Dod

Dod,

I think that you misunderstand UKW, FSFL, and BSIF etc. As I have said in this thread (scroll back and read it), their dividends are linked to RPI. To directly respond to a point in your reply:

Dividends usually increase because the number of shares in issue remains unchanged when profits in the company increase. That is not what happens with UKW and probably many of these companies which like keeping raising new capital.

That is NOT what happens at UKW etc, and never has, because the rate of dividend growth is linked to RPI. To put it bluntly, profits could double, but you'd still only get RPI-linked growth. Of course, profits couldn't double, because the regulator has a hand in things, but hopefully you see my point.

MDW1954

[idpickering]

I put up this comment aimed at Malcolm yesterday, but in the wrong thread, ie the PKP HYP thread, by accident, meaning to put it here. The sentiment is the same either way.

Thank you to you for your help and guidance in this thread. You're a gent Sir.

As for the quasi REITs we've been discussing, I've three weeks to make up my mind, so I'll mull them over in the mean time. Thanks also to all who've added your thoughts to this very interesting thread. One I know I'll be reviewing again, and again, in the future.

Ian.

[Arborbridge]

Your decision, as ever, but I see little point posting about changes to the portfolio if you are not happy to discuss the thinking behind those actions, but hey ho each to their own.

Wizard you should recognize Ian's unique style of thinking by now I would have thought.

Too right!

Abrdn Plc (SLA) was on a paltry yield of 5.46%

So replace it with:

Greencoat UK Wind Plc (UKW) on a yield of 5.49%?

idpickering certainly believes in squeezing out even the second decimal place of yield and to hell with the cost of trading!

Now that is an HYPer


Ian

Let's be fair here: rightly or wrongly, Ian has swapped what he considered to be a flaky 5.46% with a more reliable similar yield. That may not accord with your idea of a "old for eternity" HYP, but it is a valid decision within his own "peace of mind" framework. He does not deserve to have that decision lampooned by you simply because you choose to do things differently.

I might also add that the decision to sell Aberwhotsit with its turbulent history will receive some widespread support from experienced investors such as Dod, whom I know Ian takes some notice of.
This is written by someone (me) who intends to hold on to Aberdeen despite it receiving thumbs downs from some people: this is my way. Ian has a different way, but I'm not criticising him for it because - as IAAG might say - peace of mind is an important factor in investment.

Arb.

[richfool]

Ian might like to take a look at the Share Price trajectory of the renewable energy companies he's looking at. The factsheets also show NAV and premium/discount to NAV:

https://www.hl.co.uk/shares/shares-sear ... ary-shares

https://www.hl.co.uk/shares/shares-sear ... up-ord-npv

Note that TRIG, being Guernsey based, would save him stamp duty.

[Gengulphus]

Ian might like to take a look at the Share Price trajectory of the renewable energy companies he's looking at. The factsheets also show NAV and premium/discount to NAV:

https://www.hl.co.uk/shares/shares-sear ... ary-shares

https://www.hl.co.uk/shares/shares-sear ... up-ord-npv

Agreed, but note that 1-year charts are short-term by HYP standards, and also entirely within the pandemic period - so do click on the "3Y", "5Y" and/or "10Y" options as well for a more rounded and HYP-oriented view of those trajectories.

Gengulphus

[Arborbridge]

Ian might like to take a look at the Share Price trajectory of the renewable energy companies he's looking at. The factsheets also show NAV and premium/discount to NAV:

https://www.hl.co.uk/shares/shares-sear ... ary-shares

https://www.hl.co.uk/shares/shares-sear ... up-ord-npv

Agreed, but note that 1-year charts are short-term by HYP standards, and also entirely within the pandemic period - so do click on the "3Y", "5Y" and/or "10Y" options as well for a more rounded and HYP-oriented view of those trajectories.

Gengulphus

Here'tis:-



Not a lot to choose between them, and bear in mind the premium on TRIG is still around 10% as against UKW 5%. It looks like some of the froth has come off, in that case, so it's either a good time to buy or the beginning of a slump Looking at these two charts, it might suggest backing both with half in each.

Arb.

[moorfield]

And your criticism of IDP is in contrast with your silence with regard to TJH who probably trades even more: that was the point and it does not need a separate thread.

Well hopefully they both, and IanTHughes, will post their churn rates here and put that question to bed.

[idpickering]

Ian might like to take a look at the Share Price trajectory of the renewable energy companies he's looking at. The factsheets also show NAV and premium/discount to NAV:

https://www.hl.co.uk/shares/shares-sear ... ary-shares

https://www.hl.co.uk/shares/shares-sear ... up-ord-npv

Agreed, but note that 1-year charts are short-term by HYP standards, and also entirely within the pandemic period - so do click on the "3Y", "5Y" and/or "10Y" options as well for a more rounded and HYP-oriented view of those trajectories.

Gengulphus

I use HL all the time nowadays, and am fully aware of the HL pages you've highlighted, but thanks anyway.

Ian.

[richfool]

Ian, there is another table you can look at here (Citywire). You can change the period of years and look at either SP or NAV., as desired, in the comparisons:

https://citywire.co.uk/wealth_manager/i ... Period:36;

[idpickering]

Ian, there is another table you can look at here (Citywire). You can change the period of years and look at either SP or NAV., as desired, in the comparisons:

https://citywire.co.uk/wealth_manager/i ... Period:36;

Thanks very much. Most helpful.

Ian.

[Wizard]

And your criticism of IDP is in contrast with your silence with regard to TJH who probably trades even more: that was the point and it does not need a separate thread.

Well hopefully they both, and IanTHughes, will post their churn rates here and put that question to bed.

I think there are two big differences. First, TJH fine tunes his portfolio by, amongst other means, top slicing holdings, whereas Ian tends to sell off entire holdings and replaces them with alternatives. Second, TJH has a clear and well understood approach, as per the recent discussion re SLA my recollection is that Ian rarely, if ever, provides a rationale for the disposals beyond mentions of something akin to gut feel. On that basis I don't see the actions as particularly comparable.

[moorfield]

On that basis I don't see the actions as particularly comparable.

Their methods are certainly different but are comparable I think.

If two different approaches show the same churn rate, then one might say the one which produces more year on year overall income growth is the better.

And if they show the same year on year overall income growth, then one might say the approach which produces least churn rate is the better.

[IanTHughes]

I think there are two big differences. First, TJH fine tunes his portfolio by, amongst other means, top slicing holdings, whereas Ian tends to sell off entire holdings and replaces them with alternatives. Second, TJH has a clear and well understood approach, as per the recent discussion re SLA my recollection is that Ian rarely, if ever, provides a rationale for the disposals beyond mentions of something akin to gut feel. On that basis I don't see the actions as particularly comparable. On that basis I don't see the actions as particularly comparable.

Their methods are certainly different but are comparable I think.

- A defined strategy as opposed to a gut feel!

Comparable? Really?



Ian