Arb div per unit comparison

[Arborbridge]

The following shows graphically my income per unit progress over the years. I've plotted the price quarterly, but each the price is the sum of the previous four quarters: that is to say, each level represents the income for the previous year.


It's not great, but there is progress. The line suffered during the period after the referendum and various disasters such as Carillion. However, after that real progress seemed to be happening but cut short by Covid.

So far so good - or is it? Whilst I'm feeling some progress is better than none, and recovery now seems possible, how does this compare with the other notable HYP example we have - that is, Terry's HYP?
Using some figures recently published by TJH I plotted the two in my charting program, rebased to show the comparison - the result you can see is quite devastating for me.



TJH's figures are once a year points in April, but nevertheless it is obvious that these two HYPs performance is wide apart. We use broadly the same methods, and even have broadly the same shares - or at least a big overlap - but TJH's management seems for whatever reason to be far better. To paraphrase when Harry met Sally: "I'll have some of what he's having".

All HYPs and HYP managers are not equal, but I'm not sure how I can learn to improve from this.

Arb.

[tjh290633]

TJH's figures are once a year points in April, but nevertheless it is obvious that these two HYPs performance is wide apart. We use broadly the same methods, and even have broadly the same shares - or at least a big overlap - but TJH's management seems for whatever reason to be far better. To paraphrase when Harry met Sally: "I'll have some of what he's having".

All HYPs and HYP managers are not equal, but I'm not sure how I can learn to improve from this.

I'm not sure why that should be. Looking at my transactions since 2011-12, there have been a few trimmings of overweight shares each year, regular reinvestment of dividends when not needed, selling Vodafone before the demerger and buying back after, replacing RSA with Admiral, receiving Indivior and S32 through demergers, increasing them to a sensible level, then selling Indivior when they stopped paying dividends, replacing Rexam with Carillion, adding RIO Tinto with money from a surrendered insurance, replacing Premier Farnell with Legal and General, buying PHP when pharma went heavy early last year, and finally swapping William Hill for IG Group. Carillion vanished like the oozlum bird, of course.

Whether that gives any reasons, I cannot say.

TJH

[Arborbridge]

TJH's figures are once a year points in April, but nevertheless it is obvious that these two HYPs performance is wide apart. We use broadly the same methods, and even have broadly the same shares - or at least a big overlap - but TJH's management seems for whatever reason to be far better. To paraphrase when Harry met Sally: "I'll have some of what he's having".

All HYPs and HYP managers are not equal, but I'm not sure how I can learn to improve from this.

I'm not sure why that should be. Looking at my transactions since 2011-12, there have been a few trimmings of overweight shares each year, regular reinvestment of dividends when not needed, selling Vodafone before the demerger and buying back after, replacing RSA with Admiral, receiving Indivior and S32 through demergers, increasing them to a sensible level, then selling Indivior when they stopped paying dividends, replacing Rexam with Carillion, adding RIO Tinto with money from a surrendered insurance, replacing Premier Farnell with Legal and General, buying PHP when pharma went heavy early last year, and finally swapping William Hill for IG Group. Carillion vanished like the oozlum bird, of course.

Whether that gives any reasons, I cannot say.

TJH

It's such a complex web, trying to spot any differences between our investment changes, that I think it would be fruitless to spend much time on it. The only other factor might be if I am calculating the income per unit incorrectly, though I don't think so as it so simple . That's the only obvious way in which there could be a major difference.

You had Carillion too, I bought LGEN ADM PHP etc - not so many differences really. I've had IGG far longer than you, I think, from which I should have benefitted.

Arb.

[Arborbridge]

Whether that gives any reasons, I cannot say.

TJH

I notice your portfolio is subject ot more frequent change than mine - though I doubt this could account for such a big difference.

Your rate of trimming and topping up is, I believe more, for the following reasons I trimmed for capital weight usually at x2 median. There's is another probable reason: I use foreward dividends to calculate yield (via HYPTUSS) whereas your use historic or company announcements. In normal times. this may tend to give lower yields when prices are rising so you would be trimming due to low yield slightly earlier than I am.

Apart from that, maybe you just make better decisions

Arb.

[tjh290633]

Whether that gives any reasons, I cannot say.

TJH

I notice your portfolio is subject ot more frequent change than mine - though I doubt this could account for such a big difference.

Your rate of trimming and topping up is, I believe more, for the following reasons I trimmed for capital weight usually at x2 median. There's is another probable reason: I use foreward dividends to calculate yield (via HYPTUSS) whereas your use historic or company announcements. In normal times. this may tend to give lower yields when prices are rising so you would be trimming due to low yield slightly earlier than I am.

Apart from that, maybe you just make better decisions

Arb.

I trim at 1.5 times median, which makes it more frequent but, were I to use twice the median, I would be looking at buying a new holding each time. I don't think the low yield factor is significant. Zero yield certainly is. Looking at my records, the last share which I sold for low yield, Stagecoach, was in 2008. The dividend for the preceding 12 months was 4.25p, and the share price was about 257p, so the yield was about 1.65%. Everything since then has been on zero yield except for Prudential which I sold when a massive rights issue was mooted, and that had a yield of 3.8% at the time in May 2010.

TJH

[Arborbridge]

I trim at 1.5 times median, which makes it more frequent but, were I to use twice the median, I would be looking at buying a new holding each time. I don't think the low yield factor is significant. Zero yield certainly is. Looking at my records, the last share which I sold for low yield, Stagecoach, was in 2008. The dividend for the preceding 12 months was 4.25p, and the share price was about 257p, so the yield was about 1.65%. Everything since then has been on zero yield except for Prudential which I sold when a massive rights issue was mooted, and that had a yield of 3.8% at the time in May 2010.

TJH

That's the end of that idea. then But it's true you have more trimming and topups than I do, I believe - possibly due to the x2 median I employ. Most of the topups are from dividends or capital released from somewhere else.

Arb.

[idpickering]

If I may interject, I do like TJH’s idea of trimming when a share goes over 1.5 of the average capital value weighting in an HYP. My miners, RIO and BHP are over that weight, and being cyclical as they are, I’m tempted to slice the top off both and redeploy the money released elsewhere. I’m looking at bringing The Renewables Infrastucture Group, TRIG, on board my HYP. Sorry to seemingly be talking off topic in your interesting thread Arb.

Ian.

[ReformedCharacter]

If I may interject, I do like TJH’s idea of trimming when a share goes over 1.5 of the average capital value weighting in an HYP. My miners, RIO and BHP are over that weight, and being cyclical as they are, I’m tempted to slice the top off both and redeploy the money released elsewhere. I’m looking at bringing The Renewables Infrastucture Group, TRIG, on board my HYP. Sorry to seemingly be talking off topic in your interesting thread Arb.

Ian.

Just my personal view. Although it may make sense to top-slice overweight holdings to maintain diversity, I wouldn't personally top-slice miners unless they become very significantly overweight. Because they are cyclical, at some point they are likely to fall again in value compared with the average holding value in your portfolio, at which point you may be tempted to top them up again (2 x trading costs). I'm happy to accept the cyclical nature of miners because over time they produce good returns despite the feast \ famine nature of their profits.

RC

[Gengulphus]

If I may interject, I do like TJH’s idea of trimming when a share goes over 1.5 of the average capital value weighting in an HYP. My miners, RIO and BHP are over that weight, and being cyclical as they are, I’m tempted to slice the top off both and redeploy the money released elsewhere. I’m looking at bringing The Renewables Infrastucture Group, TRIG, on board my HYP. Sorry to seemingly be talking off topic in your interesting thread Arb.

Just my personal view. Although it may make sense to top-slice overweight holdings to maintain diversity, I wouldn't personally top-slice miners unless they become very significantly overweight. Because they are cyclical, at some point they are likely to fall again in value compared with the average holding value in your portfolio, at which point you may be tempted to top them up again (2 x trading costs). I'm happy to accept the cyclical nature of miners because over time they produce good returns despite the feast \ famine nature of their profits.

If you successfully manage to top-slice them when they're at cyclical highs and top them up when they're at cyclical lows, there's a rather more major effect around than a couple of sets of trading costs!

Of course, that word "successfully" is an important condition, and there is a danger of ending up not running a HYP if the cyclical highs and lows arrive too thick and fast...

Gengulphus

[idpickering]

If I may interject, I do like TJH’s idea of trimming when a share goes over 1.5 of the average capital value weighting in an HYP. My miners, RIO and BHP are over that weight, and being cyclical as they are, I’m tempted to slice the top off both and redeploy the money released elsewhere. I’m looking at bringing The Renewables Infrastucture Group, TRIG, on board my HYP. Sorry to seemingly be talking off topic in your interesting thread Arb.

Just my personal view. Although it may make sense to top-slice overweight holdings to maintain diversity, I wouldn't personally top-slice miners unless they become very significantly overweight. Because they are cyclical, at some point they are likely to fall again in value compared with the average holding value in your portfolio, at which point you may be tempted to top them up again (2 x trading costs). I'm happy to accept the cyclical nature of miners because over time they produce good returns despite the feast \ famine nature of their profits.

If you successfully manage to top-slice them when they're at cyclical highs and top them up when they're at cyclical lows, there's a rather more major effect around than a couple of sets of trading costs!

Of course, that word "successfully" is an important condition, and there is a danger of ending up not running a HYP if the cyclical highs and lows arrive too thick and fast...

Gengulphus

I can't call the top or bottom of any share, so I'm not even going to try. I don't think anyone else can either tbh. With regards to my RIO holdings particularly, they were standing at over 120% up in capital value terms in my HYP this morning. I get that HYP is about income though, and that 120% doesn't include the dividends received from my RIO shares over the years that I've held them. Either way, let's not drift off the topic of this thread any further than we already have.

Ian.

[tjh290633]

If I may interject, I do like TJH’s idea of trimming when a share goes over 1.5 of the average capital value weighting in an HYP. My miners, RIO and BHP are over that weight, and being cyclical as they are, I’m tempted to slice the top off both and redeploy the money released elsewhere. I’m looking at bringing The Renewables Infrastucture Group, TRIG, on board my HYP. Sorry to seemingly be talking off topic in your interesting thread Arb.

Ian.

Just my personal view. Although it may make sense to top-slice overweight holdings to maintain diversity, I wouldn't personally top-slice miners unless they become very significantly overweight. Because they are cyclical, at some point they are likely to fall again in value compared with the average holding value in your portfolio, at which point you may be tempted to top them up again (2 x trading costs). I'm happy to accept the cyclical nature of miners because over time they produce good returns despite the feast \ famine nature of their profits.

RC

I have never top sliced BHP nor it's offshoot S32. On the other hand I have top-sliced RIO on three occasions, topping up in between the last two trimmings. As a result the average cost of my RIO holdings is 244p, compared with £61 tonight. Swings and roundabouts work in both directions.

Bought 27 Apr 2016 at 2209p.
Added 11 May 2016 at 2021p
Trimmed by 25% on 10 Nov 2016 at 3197p when overweight
Trimmed by 25% on 09 Apr 2019 at 4726p when overweight
Added 15% on 11 Nov 2019 at 4118p when top of top-up ranking
Trimmed by 25% on 09 Jul 2020 at 4638p when overweight
Current price 6106p at tonight's close.

IRR 34.9%, 30.6% on a single share bought at the outset. Yield when first bought 6.08%, currently 6.7%.

TJH

[1nvest]

Rather than comparing income or price alone, compare total returns, accumulation style, as though dividends were reinvested. You may find that whilst one relatively outperformed another on the income front that may have lagged on the price appreciation front - that all washes once combined into total returns. Over the years I've noticed that TJH HYP accumulation units have broadly compared to FT250 total return (but TJH HYP having higher volatility so zigzags either side along the way). FT250 TR has outpaced FT100 TR so if your HYP TR has more aligned to FT100 rather than FT250 then .. not so good.

[monabri]

(see TJH's last post).

I've made some assumptions as to the first 2 initial buy quantities. The net result is that one is currently holding a qty ("72.8" **) of Rio shares that have cost about £1.20 each . Terry says his average is just over £2 a share so my assumptions in terms of initial buy quantities are not correct...no matter, I'm more interested in what might be as a result of his trimming method!

(** note..I've not attempted to round share quantities up/down -I've just plugged numbers into Excel for trimming percentages and accepted the quantities it spits out! )




But if shares are trimmed, then there will be a corresponding reduction in dividend.

The Rio dividend is in dollars. If the original 2 buys (100+50) had been left untrimmed, the accumulated dividends would have been ~$3000. However, after trimming, the dividend accrued reduces to ~$2000. A net difference of ~$1000 (£720 at today's rate). However, the released funds from trimming would have bought other shares which might have closed this gap (but not into Carillion ) . The funds "released" by trimming being £1199 in 2017, perhaps returning 4 years of divis at 5% (£240) and perhaps another 1.5years at 5% for the £1329 (~£100)...assuming that the funds were not redirected to the cutters/suspenders! So.....perhaps half of the lost dividend might have been recovered.





SUMMARY

Scenario 1 Don't Trim
Share Value = £9150
Divis received ($) = 3015

Scenario 2 Trimming
Share Value = £4445
Divis received ($) = 1950 + £340 (latter figure from reinvestment of funds released after trimming).

On the face of it, for this case, I think that I'd elect for the non-trimming route but a lot really does depend on where the trimmed money was re-invested as Rio shares have done pretty well from £22 per share to £61 per share..after all, one might have trimmed and redeployed into IMB/RDSB/BATS/WPP/VOD or GSK whose share prices movements and dividends have not played out as attractively as have Rio's.

[tjh290633]

There is obviously some confusion, so here is my own table of the events:

Date         Change    Holding   Ave Cost   CGT Cost
27/04/2016   100.00%   100.00%     £22.22     £22.22
11/05/2016    18.18%   118.18%     £21.95     £21.95
10/11/2016   -24.92%    93.26%     £18.64     £21.95
09/04/2019   -25.00%    68.26%      £9.13     £21.95
11/11/2019    15.03%    83.29%     £13.37     £24.51
09/07/2020   -24.94%    58.35%      £2.44     £24.51

I hope that this clarifies the matter. Regarding dividends, yes, if you sell some of the shares you get less dividends, and if you buy more shares, then you get more dividends. The question is, in which shares was the cash realised invested? In November 2016 it was British Land and Marks & Spencer. In 2019 it was Lloyds Bank and Kingfisher. The last time in 2020 it was SSE, Shell and Tesco with the help of some accumulated dividends. As you know I usually specify what I did with the funds when I report the transactions.

TJH

[Arborbridge]

Rather than comparing income or price alone, compare total returns, accumulation style, as though dividends were reinvested. You may find that whilst one relatively outperformed another on the income front that may have lagged on the price appreciation front - that all washes once combined into total returns. Over the years I've noticed that TJH HYP accumulation units have broadly compared to FT250 total return (but TJH HYP having higher volatility so zigzags either side along the way). FT250 TR has outpaced FT100 TR so if your HYP TR has more aligned to FT100 rather than FT250 then .. not so good.

. FT250 TR has outpaced FT100 TR so if your HYP TR has more aligned to FT100 rather than FT250 then .. not so good.

Not so good? - or exactly what you would expect of HYP. What is this "good" of which you speak in this HYP context? One can always find share techniques with go-faster strips, but that isn't what HYP is about, and actually borders on "not-what-we-should-be-discussing-here". HYP isn't about TR, but income.
The classic HYP buys big companies in each sector, so to say it's performance is nearer to the FTSE100 than FTSE250 is to confirm that it's a HYP

Arb.