Admiral exceeds weight

[onthemove]

However the point about this thread is surely that if things are looking good leave them alone and stop fretting if a share's value gets above some magical percentage of the portfolio. It is there for good reason.

Dod

Hmmm...

I did that with Stobart (aka. Esken). It went up and up and up, and backed by dividend rises to boot - (iirc) still yielding around 6% even after the huge rises.

At one point, my holding was heading seemingly unstoppably to £30K - I seriously considered either selling or at least trimming, concerned at how big it was in proportion to all my other holdings and how much gain I was sitting on, but held off doing so, feeling reassured that the capital gains were being supported by very substantial dividend rises - it was still yielding a good yield.

In both 2017 and 2018 it contributed the highest cash flow in portfolio from dividends - accounting for over 8% of my dividends both those years - that's more than any other of my holdings, and all coming about because the company increased the dividends substantially... iirc doubling them, then doubling them again (or something like that).

Today, that same holding, kept all this time, has a capital value of barely scraping over £2K and yield 0.0%.

That drop in both yield and capital has had quite an effect on my average monthly dividend income - not for the better.

It's gone from being my highest total (absolute) return share, to now returning a loss in total returns - even with dividends included.

While I admit, that my AstraZeneca shares have done particularly well recently - and the yield now quite low as a result - I am wondering whether I should sell or not... but given the life sciences area they are in, and substantial IP and R&D, I'm being a bit tardy in doing anything about them just yet.

But I'm not sure that I'd do the same with an insurer or other financial share. There's no real IP there, and the financial markets are quite competitive.

Sorry, I don't see any read across here at all. There's nothing to link the two thoughts is there? and certainly not in any particular case like this in which the clearest choices would lead to a reduction in income.

Your sarcasm is hardly warranted - and unless you can explain some genuine rationale behind your comment which I haven't spotted, what you are saying is nonsense.

I thought MDW1954 was just trying to make a good natured, light hearted observation, and I could see - and agree with - what he was saying.

I think you may be a little overreacting. I didn't see it as sarcasm.

In essence he was (imv, gently and good natured) pointing out that you had previously referred to how your returns haven't matched TJH's returns but you weren't sure why... all MDW was pointing out was that hey, you acknowledge that TJH would likely do one thing here, but you are not sure and are thinking of doing something different.

It's just an observation. At the end of the day, we each need to do what feels right for ourselves, and if you don't feel right yourself doing what you believe TJH would have done, then there's absolutely nothing wrong with that.

But in general, if you do something and get a different result to someone else, the difference is more than likely going to be in where you do things differently to that someone else. No problem with that. Just an observation.

[Dod101]

onthemove, I read your story about Stobart with interest. Back in the tech bubble of 2000 I had much the same experience with Cable & Wireless. They were in my late wife's name and I inherited them. At the time of her death they were worth around £34,000, a lot of money now but a lot more then. I remember my solicitor asking me if wanted them transferred to my name or just transfer them as cash. I took them in specie and for a while they did fine but then began to fall off in value. Like you with Stobart, I kept them- just a blip- but some time later I ended up with about 10% of what they had been, That was a lesson for me and ever since I have been very wary of both rapid rises and of corporate activity which i cannot quite get my head round.

That caution saved me in the financial crisis in 2008 when I sold my HBOS, Barclays and some Lloyds in January of that year. I kept some Lloyds because they were much more secure than the others at that time. I then sold them about a year later at a fraction of what I got for the first lot.

I do not think that this applies to Admiral though.

Dod

[moorfield]

As interesting as this thread is, did we get to the bottom of whether Arb is trimming ADM or not ?

[monabri]

General browsing this morning- I noticed that the only UK company in Baillie Gifford's global income growth fund is ADM.

https://www.fidelity.co.uk/factsheet-da ... /portfolio

[88V8]

Admiral is my largest percentage gainer, albeit not my largest holding in value or income.
I feel vaguely that I should bank some profits, but they also have a stonking yield.
And even if they totally evaporated it would only be an irritation.
So I shall probably do nothing.
But I suspect in the long run, Terry is right and I am wrong.

V8

[funduffer]

tjh would top slice.

The architect of HYP, pyad, I am sure if he was here, would be clear on this - do nothing!

FD

[moorfield]

tjh would top slice.

Fair enough, but where next? (see also my question above). Everyone's relative weights are different, so only Arb can opine here really.

If top slicing for the sake of top slicing has the effect of ratcheting down a portfolios overall income, then it begins to not make sense to me. Wouldn't you agree?

[Itsallaguess]

If top slicing for the sake of top slicing has the effect of ratcheting down a portfolios overall income, then it begins to not make sense to me.

But if an imaginary income-investor had 100% of their portfolio in Admiral, and there was no way for them to diversify 'without dropping their overall portfolio income', would you advise him to stick with his 100% holding?

I know this is an extreme example, but it's a flavour of the situation that those that have income-weighting limits wish to deal with, but often with a set of figures that's clearly not quite that stark...

onthemove earlier gave an example of how his Stobart holding went from hero-to-zero in both capital and income terms after allowing things to ride, so that perhaps suggests that there is some middle-ground to be found where diversifying over-weight holdings can be a sensible approach when things get too unbalanced, and it sounds like Arb is just trying to find where that middle-ground is...

Cheers,

Itsallaguess

[moorfield]

But if an imaginary income-investor had 100% of their portfolio in Admiral, and there was no way for them to diversify 'without dropping their overall portfolio income', would you advise him to stick with his 100% holding?

I know this is an extreme example, but it's a flavour of the situation that those that have income-weighting limits wish to deal with, but often with a set of figures that's clearly not quite that stark...

It's also a flawed example in this context, because Admiral would always have a median weighting of 1 in that portfolio, and never be a candidate for top slicing! I'm not questioning the merits of income diversification; I'm questioning the merits of (blindly, perhaps) acting on the top slicing "signal" here.

[Itsallaguess]

I'm not questioning the merits of income diversification; I'm questioning the merits of (blindly, perhaps) acting on the top slicing "signal" here.

You might think the '100% Admiral portfolio' example is a flawed one, and it was meant to be a stark 'example situation', but if we ask ourselves a question as to whether 'some action' should be taken on the make-believe path between having a portfolio of 15 equally-balanced holdings and having a portfolio of a single 100% holding, then I'd like to think that the answer would be 'yes', and so then it's just about finding out when and how that action might be taken...

I think the 'blindly' aspect can be seen both ways - you might say 'blindly', and someone else might say ''I've got a working system that gives consistent portfolio-management trigger-points, and I'm happy to work within those self-selected processes in a consistent way'....

The triggering signals are only 'blind' once they've been set up, don't forget, but they've been set up with eyes wide open and for a particular purpose - to stop things ending up in that imaginary 100% single-holding scenario...

Read onthemove's post earlier in this thread again, and then go look at HYP1...

Cheers,

Itsallaguess

[Gengulphus]

But if an imaginary income-investor had 100% of their portfolio in Admiral, and there was no way for them to diversify 'without dropping their overall portfolio income', would you advise him to stick with his 100% holding?

I know this is an extreme example, but it's a flavour of the situation that those that have income-weighting limits wish to deal with, but often with a set of figures that's clearly not quite that stark...

It's also a flawed example in this context, because Admiral would always have a median weighting of 1 in that portfolio, and never be a candidate for top slicing! ...

That's easily fixed: change the example to having 98.6% of their portfolio in Admiral, and 0.1% in each of fourteen other shares. Or if that isn't extreme enough for you, 99.86% in Admiral and 0.01% in each of fourteen other shares, or 99.986% in Admiral and 0.001% in each of fourteen other shares, or ... You're right that the example fails if you actually get to 100% in Admiral, but you can get very close to 100% without it failing.

Especially in an account like Halifax Sharebuilder, which tracks your number of shares in units of a millionth of a share! ;-)

Gengulphus

[MDW1954]

Sorry, I don't see any read across here at all. There's nothing to link the two thoughts is there? and certainly not in any particular case like this in which the clearest choices would lead to a reduction in income.

Your sarcasm is hardly warranted - and unless you can explain some genuine rationale behind your comment which I haven't spotted, what you are saying is nonsense.

I thought MDW1954 was just trying to make a good natured, light hearted observation, and I could see - and agree with - what he was saying.

I think you may be a little overreacting. I didn't see it as sarcasm.

In essence he was (imv, gently and good natured) pointing out that you had previously referred to how your returns haven't matched TJH's returns but you weren't sure why... all MDW was pointing out was that hey, you acknowledge that TJH would likely do one thing here, but you are not sure and are thinking of doing something different.

It's just an observation. At the end of the day, we each need to do what feels right for ourselves, and if you don't feel right yourself doing what you believe TJH would have done, then there's absolutely nothing wrong with that.

But in general, if you do something and get a different result to someone else, the difference is more than likely going to be in where you do things differently to that someone else. No problem with that. Just an observation.

You have correctly characterised my intentions. Thank you.

What Arb chooses or not to take away is up to him, but you at least have seen the point being made.

MDW1954

[tjh290633]

Fair enough, but where next? (see also my question above). Everyone's relative weights are different, so only Arb can opine here really.

If top slicing for the sake of top slicing has the effect of ratcheting down a portfolios overall income, then it begins to not make sense to me. Wouldn't you agree?

Normally the top sliced share has a lower yield. If so, then you can always top up a share with a higher yield. In my case it would be IMB and/or BATS. Unfortunately my rule about share of income rules them out (4.9% and 4.7% respectively). But then, ADM is only 14% above median weight in my portfolio, so wouldn't be sliced.

This is a problem to which only Arb can find the solution.

TJH

[Arborbridge]

I am not a HYPer and I find confirmation for this stance most weeks. Arb seems to be a sensible fellow but for him even to consider cutting Admiral at this juncture seems to irrational. It must be the heat that is getting to him. Here we have a decent share offering a nice big increase in the dividend (manna from heaven to HYPers) and Arb worries about it being overweight!

I too hold Admiral and think it may be a little overweight (like me!) but so what? It produces the goods.

Dod

Still, Dod, a method is a method, and if one accepts that not having too much weight in one share is one of HYP's* safety factors, then trimming is not irrational, as you suggest. It is a perfectly logical reaction to what the market has dealt.
"Rationality" has to be judged within the framework which has been laid down - i.e. within context. Not to trim within that context would be an irrational step. Naturally, the HYPer has the right to over-ride the rules if it seems appropriate - for example if the situation is judged to be temporary on any reasonable basis. That's why Terry does not always react immediately to any given situation, and why he sometimes vetoes a particular action in favour of something alternative course. That was one part of my objection to MDW's criticism of me the other day. The other was that there is a tenuous link, at best, between any particular decision and the long term difference between two portfolios.

In practice, of course, one could argue that the weight limit of 2x median is unecessarily tight, or indeed loose - perhaps others would be happy in a mature HYP with 10%,15%,25% of their HYP wealth invested in one share. That depends on one's attitude to this particular risk and is a variable feast. It also happens that with ADM is it producing over 7% of my income, so it's looking toppish on that criterion too, even allowing to some rebalancing as dividends come back to normal.

*HYP as modified by TJH and many others.


Arb.

[Dod101]

Actually I tend to go along with about 2 times median as well in terms of capital value for my general portfolio so I am not really arguing whether you are being rational or not and it is certainly not for me on the HYP Board to make any comment except in the most general terms. As has been said many times, it is up to the individual to act as he feels most comfortable with.

Dod

[Arborbridge]

Sorry, I don't see any read across here at all. There's nothing to link the two thoughts is there? and certainly not in any particular case like this in which the clearest choices would lead to a reduction in income.

Your sarcasm is hardly warranted - and unless you can explain some genuine rationale behind your comment which I haven't spotted, what you are saying is nonsense.

I thought MDW1954 was just trying to make a good natured, light hearted observation, and I could see - and agree with - what he was saying.

I think you may be a little overreacting. I didn't see it as sarcasm.

In essence he was (imv, gently and good natured) pointing out that you had previously referred to how your returns haven't matched TJH's returns but you weren't sure why... all MDW was pointing out was that hey, you acknowledge that TJH would likely do one thing here, but you are not sure and are thinking of doing something different.

It's just an observation. At the end of the day, we each need to do what feels right for ourselves, and if you don't feel right yourself doing what you believe TJH would have done, then there's absolutely nothing wrong with that.

But in general, if you do something and get a different result to someone else, the difference is more than likely going to be in where you do things differently to that someone else. No problem with that. Just an observation.

Yes, I probably over-reacted. Probably never a good thing to put one's first thought on the internet, but wait until the following day

However, the point behind the remark from MDW was not, in my view entirely valid.
The meanderings of two different HYPs over time are more complex than just nailing it on my hesitating or pickering over what to do in this or any other case.
TJH himself does not always follow his own rules, or bends them to suit the circumstances (eg buying Lloyds for their potential when they were not HYPable, waiting until the knees stop kicking - a variable factor). It could be this "secret sauce"plus a good deal of chance in how events unfold which gives Terry the advantage, not the fact that I was also thinking of "taking a view" on a particular event. Both Terry and I do that: he is just better at it.

Arb.

[Arborbridge]

I do not think that this applies to Admiral though.

Dod

Probably not, but one might live to be wise after the event. The idea of a ceiling on capital weight was to add a safety factor to protect us from the problem you identified - it's there for a good reason for people who are maybe not as able as you to smell trouble

( OT aside: Incidentally, I was saved from Cable and Wireless by learning about TA. It was clear to me from the chart that there was trouble afoot, so I set a stop-loss which triggered and saved a lot of heartache)

Arb.

[Arborbridge]

As interesting as this thread is, did we get to the bottom of whether Arb is trimming ADM or not ?

No decision as yet. I've had a pleasant weekend away from the keyboard. Yesterday walking nine miles in the heat!

I have some domestic matters to picker over, so ADM pickering is not currently centre stage.

But I am pleased to see I have stimulated an interesting and useful thread, notwithstanding the unfortunate fact that I was perhaps a little sharp in my response to MDW, for which I apologise.


Arb.

[moorfield]

No decision as yet.

Well we have a gently crashing market this morning, so you might have missed the boat already! No rush ...

[Arborbridge]

No decision as yet.

Well we have a gently crashing market this morning, so you might have missed the boat already! No rush ...

I agree to "no rush" - this is a medium term question rather than something I have to solve today!

Indeed, the table will already look different (I need to adjust for PNN "special") and by the end of the week something else may have happened - so I am not taking action now. Another personal factor I haven't mentioned is that ADM is in a broker account which just happens to have more ITs in it than HYP shares, so clearly the "what to buy next" question is fairly important - what with the yield/risk/dividend growth/ trade off.

BTW, ADM has flirted with x2 median a couple of times previously, but didn't stay long enough to require correction.

Arb.