My HYP.

[idpickering]

Good afternoon all,

Here's my HYP as is currently, on the addition of the top up of BT Group scheduled for this Tuesday;


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Stock                        Yield          Sector               Weighting 
                                                                           
AstraZeneca                  5.1%          Oil & gas            12%       
BAE Systems                  3.7%          Tobacco               9.9%     
BP.                          7.4%          Pharmas               8.7%     
BT Group                     4.3%          Utilities             7.2%     
British American Tobacco     4.2%          Banks                 6.4%     
British Land                 5.0%          Life insurance        5.9%     
Carillion                    7.7%          Food producers        5.5%     
Centrica                     6.2%          Aero & defence        5.4%     
Diageo                       3.2%          Household goods       4.5%     
GlaxoSmithKline              5.2%          General finance       4.5%     
HSBC                         6.2%          Mobile tels           4.4%     
Imperial Brands              5.0%          Fixed tells           4.0%     
Legal & General              6.6%          Mining                3.7%     
National Grid                4.2%          Support               3.4%     
Provident Finance            5.2%          Food retail           3.4%     
Rio Tinto                    3.0%          Ind transport         3.2%     
Shell                        7.3%          Electricity           3.0%     
Royal Mail                   4.6%          Real estate           2.6%     
SSE                          6.1%          Beverages             2.2%     
Sainsbury                    4.3%                                         
Tate & Lyle                  4.2%                                         
Taylor Wimpey                9.4%                                         
Unilever                     3.6%                                         
Vodafone                     6.3%                                         
                                                                           


I mentioned before that it's likely that British Land will be topped up next month. Comments welcome.

Regards,

Ian.

[Dod1010]

Nothing much wrong with that Ian. I would not be adding many more shares though. What do you reckon is the current portfolio yield?

[idpickering]

Nothing much wrong with that Ian. I would not be adding many more shares though. What do you reckon is the current portfolio yield?

Thanks for your reply Dod. The overall average yield is about 5.3%. I don't mind admitting that the HYP is tilted towards the higher yielding shares, as maybe a HYPer would do naturally.

With regards to adding further shares, although I have mentioned elsewhere that I'd consider a brewer and such-like, along with United Utilities to bring in a water company, I'm not sure if, or when that might or mightn't occur. 24 shares is more than enough holdings maybe?

Regards,

Ian.

[Raptor]

Nothing much wrong with that Ian. I would not be adding many more shares though.

I agree, mine is currently 24, am seriously looking at getting rid of Tesco shortly, just waiting for some divis to turn up in my ISA which would give a "nice" pot to top-up another which looks like MKS but who knows what it will be in a couple of weeks, could even be a new "share".

Raptor.

[staffordian]

Looking good Ian.

My view on the number of different shares is that once above about fifteen, anything further simply needs to justify itself as the best share at the time of purchase, subject to diversification rules etc. If the best share is a top up of an existing holding, that's fine, if it's a a new one, that's fine too.

So as far as my HYP is concerned, I've no figure in mind as the best number, if I end up with fifteen or with fifty, it doesn't matter; the amount of admin is as much or as little as one chooses, so IMHO a large number is not an issue.

Staffordian

[idpickering]

Looking good Ian.

My view on the number of different shares is that once above about fifteen, anything further simply needs to justify itself as the best share at the time of purchase, subject to diversification rules etc. If the best share is a top up of an existing holding, that's fine, if it's a a new one, that's fine too.



Staffordian

What an excellent paragraph that is Staffordian. Your comment should be displayed in big letters, and illuminated, hereabouts.

Have another virtual rec sir.

As it stands right now I can say that it is probably unlikely that I'll be going up to 25 holdings any time soon.

Regards,

Ian.

[Itsallaguess]

My view on the number of different shares is that once above about fifteen, anything further simply needs to justify itself as the best share at the time of purchase, subject to diversification rules etc.

I've posted recently on the 'HYP1 is 16' thread that for the past seven years HYP1, which has contained just 15 shares over that period, has had around 66% of it's income and capital arising from just 5 shares in each of those 7 years -

viewtopic.php?f=15&t=432&p=6145#p6145

That would be enough for me to look beyond such a small number of high-yield shares in terms of delivering a long term retirement requirement, as I'd simply see that sort of large 66% ratio as being too risky in terms of reliance on such a small sub-set of HYP shares for such a large section of my income and capital.

At the very least I think I'd look to double up into two companies per sector as and when the opportunities arose. That of course wouldn't perhaps lessen any sectorally-based risk, but would at least reduce any portfolio-impact arising from major company-specific issues.

Of course people's perception of risk, and the ability for them to handle such issues are quite a personal thing, and I'm sure there are income-seekers who may be much more comfortable than me with a 66% income and capital reliance on just 5 HYP1 shares for the past seven years.

I'd prefer a little more diversification, personally.

Cheers,

Itsallaguess

[toofast2live]

Quite so. You want to diversify company risk as well as sector risk. Two companies from each sector seems eminently sensible, so a HYP size of, say, 30 to 32 companies seems sound.

[idpickering]

Quite so. You want to diversify company risk as well as sector risk. Two companies from each sector seems eminently sensible, so a HYP size of, say, 30 to 32 companies seems sound.

It's a fair point toofast2live, but some sectors only offer one potential candidate. As you can see, I have done exactly as you suggest, with holdings like AZN & GSK, RDSB & BP. etc.

Regards,

Ian.

[Dod1010]

I got the impression that HYP1 had not done much by way of trimming so of course over a longish period you are going to find high dependence on a very few number of shares as some shares will naturally grow more than others in terms of both dividend and capital value but most of us will trim back as the share price rises (and sometimes the yield falls)

My feeling is that around 20/25 shares is more than ample because you risk picking up a few duds if you are say doubling up for the sake of .....what?
So I think that Ian is about right where he is and whilst he has a few shares I do not hold I think overall it is not a bad selection.

5.3% is a good yield. I will tell you at year end what my yield is because I calculate it on dividends received in the year divided by year end value. That way I have facts, which I quite like, rather than projections. Also it means that I should not have much of a disappointment for the next year.

[77ss]

I'd prefer a little more diversification, personally.

Agreed. I started out aiming for 15 shares, but as opportunities arose over the years, this rose to my current 30.

I feel more comfortable with this number, which permits doubling (or more) up in some sectors. I don't intend to add any more though.

[tjh290633]

I got the impression that HYP1 had not done much by way of trimming

I think that you will find that there has been no trimming whatsoever.

When shares were taken over, the proceeds were invested in a single replacement share for the one being lost, which accounts for some of the imbalance.

TJH

[carioca]

I'm wondering if I am reading the information you provided correctly. I looked at it as a four column table, where for every holding you show the yield %, the sector, and the weighting of that holding as percentage of the total portfolio.
However, the sectors do not correspond to the companies listed on the left, staring with AstraZeneca and Oil & Gas. It looks to me like that Sector column has got somehow jumbled in the process of uploading it. In that case I wonder if it's the only column that got jumbled.

There is another explanation. This could be really two tables, each consisting of two columns. The first table (columns 1 and 2) shows the companies you hold, and their yield %; the second table (columns 3 and 4) shows the sectors you're invested in and their respective weighting. In that case, I'm making a mistake simply trying to read the table from left to right.

Could you tell me which of the two options it is?

[midgesgalore]

I'm wondering if I am reading the information you provided correctly. I looked at it as a four column table, where for every holding you show the yield %, the sector, and the weighting of that holding as percentage of the total portfolio.
However, the sectors do not correspond to the companies listed on the left, staring with AstraZeneca and Oil & Gas. It looks to me like that Sector column has got somehow jumbled in the process of uploading it. In that case I wonder if it's the only column that got jumbled.

There is another explanation. This could be really two tables, each consisting of two columns. The first table (columns 1 and 2) shows the companies you hold, and their yield %; the second table (columns 3 and 4) shows the sectors you're invested in and their respective weighting. In that case, I'm making a mistake simply trying to read the table from left to right.

Could you tell me which of the two options it is?

Hi carioca
Your last comment "I'm making a mistake simply trying to read the table from left to right." is correct, you are mistaken.
The table looks to be constructed as you imagine; to make as much as possible easy to view on one page. The 2 left columns show the constituents. The last two should be read as synthesising the data on the first columns to make the sector data.

midgesgalore

[idpickering]

I'm wondering if I am reading the information you provided correctly. I looked at it as a four column table, where for every holding you show the yield %, the sector, and the weighting of that holding as percentage of the total portfolio.
However, the sectors do not correspond to the companies listed on the left, staring with AstraZeneca and Oil & Gas. It looks to me like that Sector column has got somehow jumbled in the process of uploading it. In that case I wonder if it's the only column that got jumbled.

There is another explanation. This could be really two tables, each consisting of two columns. The first table (columns 1 and 2) shows the companies you hold, and their yield %; the second table (columns 3 and 4) shows the sectors you're invested in and their respective weighting. In that case, I'm making a mistake simply trying to read the table from left to right.

Could you tell me which of the two options it is?

Hi carioca,

It is two tables side by side. It was a struggle doing just the one so I elected putting them on the same set of tabulation.

Ian.

[Arborbridge]

The idea of two shares per sector is one which appealed to me when Luni suggested it some years ago. Later, he rather went back on that and said it wasn't necessary. However, much as I prefer it, sometimes the problem was that the two shares didn't always exist. or one turned into a dud on me. On the other hand, you could say that proved better than put all my capital into the "dud" thus showing the system did provide some defence against my own poor judgement.

Examples might be (with the dud being obvious): SBRY + Tesco, Carillion+Balfour Beatty, HSBC+Lloy, LGEN+Aviva, GOG+FGP. BBY and FGP were sold.
But AZN+GSK, IMB+BATs and several others work well. Others are still loners;British Land remains the only one in that sector for instance, but some sectors included more than two: Interserve joined BBY and CLLN in broadly the same sector, and Standard Life joined the insurance sector.

I still like the idea, if it can be achieved. As for administration, I wouldn't go above 40 again, but that is entirely owing to the fact my "administration" is self inflictedly more than it needs to be. And I have about 20 ITs to add into the mix also.

My thrust in recent years has been to reduce holdings if anything. preferring larger dollops of cash coming in and less recording to do. At one time I must have had in the region of 200 holdings in total of all types, but the HYP never became larger than 42. (Now 38).

Arb.

[Dod1010]

I mostly have two shares per sector; but that is because I like the sector not because of any idea that if it is a dud.............I pick shares because I like them and if that means two shares per sector fine. I would not normally have three shares per sector though.

HYP1 is of course unbalanced if it has had no trimming whatever, and shows up the weakness in the pyad system. It is producing the goods but at a higher risk than I would want. The remedy is not necessarily more shares but trimming and rebalancing, such as most of us do.

Anyway well done Ian. Good HYP and a stimulating discussion.

[Arborbridge]

.I pick shares because I like them and if that means two shares per sector fine.

So did I, Dod. But if you have picked no duds in the past ten years, then it shows your stocking picking ability is better than mine, or you memory is worse

The fundamental idea of picking two per sectors is as a method of risk mitigation, and it succeeded in doing so, as far as I can tell.

HYP1 is show casing what would happen with a fit and forget approach. It shows that it works to a greater or lesser degree: not that it cannot be imroved upon. For a complete Doris, it is a satisfactory solution but most of us more active investors would be unhappy with the resulting distribution. I cannot say that my constant meddling has served me any better, except in that the risk of a large dividend failure is lower, which suites me. But if I had not trimmed and BAT was now a very large part of my portfolio, I might have been better off both in dividends and capital.


Arb.

[idpickering]

Anyway well done Ian. Good HYP and a stimulating discussion.

Thank you very much Dod. I'm very much enjoying the fact that a seemingly large portion of our gaggle have moved over to this forum, and that such discussions as this can continue. Long may it continue.

Regards,

Ian.

[Gengulphus]

I got the impression that HYP1 had not done much by way of trimming

I think that you will find that there has been no trimming whatsoever.

Not actually quite true, but very nearly! Intercontinental Hotel's recent returns of capital, which have been followed by reinvesting the proceeds elsewhere than in the Intercontinental Hotels holding itself, are trimmings. It's just that they are not investor-initiated trimmings, but company-initiated ones, that the investor could decline (apart from a small amount of trading costs) by reinvesting them in the original holding - but on recent occasions, HYP1 has not declined them.

There have also been four outright sales that HYP1 could have avoided if it had really wanted to: one of the rights in the two-stage United Utilities rights issue, one of Alliance & Leicester when it was being taken over by Banco Santander, two of the two small holdings (one foreign, the other not) in Mondi when Anglo American demerged them.

When shares were taken over, the proceeds were invested in a single replacement share for the one being lost, which accounts for some of the imbalance.

Yes - in particular, the Gallaher and Associated British Ports takeovers were both for quite large sums relative to the portfolio size, and were completely re-invested in BATS and BT respectively. And as those are the two biggest holdings now, reinvestment of only 1/15th of the portfolio value in them and the rest elsewhere would have made HYP1 considerably less unbalanced. Precise figures are impossible to give without knowing where "elsewhere" would have been, and it's impossible to work that out now without excessive risk of hindsight bias, but a few thought experiments say that something in line with TJH's figures would be plausible - i.e. a bit over half of the portfolio being in the top 1/3rd of holdings, rather than around 2/3rds of it.

The point of which is that I regard the case that trimming is essential to prevent a HYP becoming unbalanced as unproven: it's possible that a reinvestment policy that aims to restore balance (rather than one that recklessly perpetuates it) is enough.

Gengulphus