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Jam's HYP - First Outing as of 11th June 2022

General discussions about equity high-yield income strategies
Jam1
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Jam's HYP - First Outing as of 11th June 2022

#506569

Postby Jam1 » June 11th, 2022, 11:06 pm

Moderator Message:
As this portfolio is largely IT based I've nudged it from HYP-Practical to here leaving a link. - Chris

Good Evening.

I have lurked on the HYP Practical Forum for many years now, even in the Motley Fool period, having very much appreciated the introduction to HYP and the level of diligent discussion. My interest and investment in a HYP has waxed and waned over the years, often down to disasters such as Deepwater Horizon at BP, accounting discrepancies at Tesco or company failures at Interserve and Carillion. I have not been systematic in my approach and indeed, have periodically focussed on ITs, Trackers and Trading portfolios. Yet I have maintained a LTBH approach regarding the HYP constituents. Thus I hope I have not swept up too many non-HYP holdings in the following portfolio.

By way of context I am over five years off the point when I may decide to retire, but having monitored my dividend income more closely over the last six years, have perhaps greater confidence in this form of passive income, not least given that it will supplement a workplace pension. Of course the recent shift to value shares has benefited this portfolio from a capital perspective and perhaps reignited my interest.

A few reflections (or excuses):

1. NAIT is the result of a long-term regular investment, now stopped, but continues to growth through dividend reinvestment.
2. I hold a range of ITs, and from a HYP perspective, assume overseas ITs maybe justified, but the UK standards such at MUT and MRCH may not be?
3. I hold Blackrock World Mining, so apart from a small holding in RIO have not purchased mining shares.
4. Larger holdings in BP, SHELL, GSK and UNILEVER are primarily down to trading like purchases at considered lows in the pandemic era. I have not trimmed the oil companies given the foreseeable continued strength of the price of oil (albeit do not understand the limited impact on the share prices following the windfall tax). Nevertheless this runs counter to my next point....
5. I continue to buy new HYP shares, most recently IGG, ADM and SSE, driven by a desire to make an individual company failure immaterial to the portfolio. I have not followed the diworsification debate.
6. I have continued to hold Marston's (MARS) despite the cessation of dividends.
7. I exited Tesco in the last 12 months following a rise, and have since avoided retailers.

Any comments on the HYP would be most welcomed, as I would like to become more disciplined (and successful).

Thank you
Jam (tomorrow)

                                                                                 Value     Div    Fcst 
Share Epic Sector %Total %Total Yield

North American Income Trust NAIT IT - North America 15.86% 11.79% 3.50%
BP BP Oil & Gas Producers 9.13% 7.95% 4.10%
Shell SHEL Oil & Gas Producers 7.87% 5.85% 3.50%
Unilever ULVR Food Producers 4.92% 4.18% 4.00%
BlackRock World Mining Trust BRWM IT - Commodities & Natural Resources 4.91% 6.36% 6.10%
GlaxoSmithKline GSK Pharmaceuticals & Biotechnology 4.26% 2.72% 3.00%
Murray International Trust MYI IT - Global Equity Income 3.58% 3.27% 4.30%
Murray Income Trust MUT IT - UK Equity Income 3.47% 3.02% 4.10%
Apax Global Alpha Limited APAX IT - Private Equity 3.16% 4.17% 6.20%
Merchants Trust MRCH IT - UK Equity Income 2.82% 2.99% 5.00%
AstraZeneca AZN Pharmaceuticals & Biotechnology 2.36% 1.20% 2.40%
Imperial Brands IMB Tobacco 2.33% 3.97% 8.00%
Henderson Smaller Companies In HSL IT - UK Smaller Companies 2.13% 1.22% 2.70%
BAE Systems BA Aerospace & Defence 1.89% 1.36% 3.40%
Legal and General Group LGEN Life Insurance 1.86% 3.16% 8.00%
National Grid NG Multiutilities. 1.84% 1.92% 4.90%
British American Tobacco BATS Tobacco 1.81% 2.53% 6.60%
Aviva AV Life Insurance 1.81% 2.92% 7.60%
European Assets Trust EAT IT - European Smaller Companies 1.79% 3.04% 8.00%
Henderson Far East Income Ltd. HFEL IT - Asia Pacific Income 1.52% 2.55% 7.90%
BlackRock Latin American Inv T BRLA IT - Latin America 1.46% 1.71% 5.50%
Phoenix Group Holdings (DI) PHNX Life Insurance 1.44% 2.48% 8.10%
Templeton Emerging Markets Inv TEM IT - Global Emerging Markets 1.44% 0.77% 2.50%
Tritax Big Box Reit BBOX IT - Property - UK Commercial 1.36% 0.98% 3.40%
HICL Infrastructure Company Lt HICL IT - Infrastructure 1.35% 1.32% 4.60%
British Land Company BLND Retail REITs 1.28% 1.12% 4.10%
Tate and Lyle TATE Food Producers 1.26% 0.67% 2.50%
Aberdeen Asian Income Fund Ltd AAIF IT - Asia Pacific Income 1.26% 1.18% 4.40%
Lloyds Banking Group LLOY Banks 1.10% 1.26% 5.40%
Persimmon PSN Household Goods & Home Construction 1.10% 2.54% 10.90%
Vodafone Group VOD Mobile Telecommunications 1.10% 1.44% 6.20%
Standard Life Investments Prop SLI IT - Property - UK Commercial 0.89% 0.89% 4.70%
ITV ITV Media. 0.76% 1.22% 7.60%
M and G MNG Financial Services 0.75% 1.41% 8.80%
Marston's MARS Travel & Leisure 0.75% 0.00% 0.00%
Land Securities Group LAND Industrial & Office REITs 0.66% 0.73% 5.20%
Rio Tinto RIO Mining. 0.63% 1.64% 12.20%
HSBC Holdings HSBA Banks 0.48% 0.45% 4.50%
IG Group Holdings IGG Financial Services 0.42% 0.67% 7.50%
SSE SSE Electricity 0.41% 0.44% 5.10%
Admiral Group ADM Nonlife Insurance 0.41% 0.71% 8.20%
Standard Chartered STAN Banks 0.34% 0.17% 2.40%

Portfolio Running Yield = 4.71%


Value Div
Sector %Total %Total

IT - North America 15.86% 11.79%
Oil & Gas Producers 17.00% 13.80%
Food Producers 6.18% 4.85%
IT - Commodities & Natural Resources 4.91% 6.36%
Pharmaceuticals & Biotechnology 6.62% 3.92%
IT - Global Equity Income 3.58% 3.27%
IT - UK Equity Income 6.29% 6.01%
IT - Private Equity 3.16% 4.17%
Tobacco 4.14% 6.50%
IT - UK Smaller Companies 2.13% 1.22%
Aerospace & Defence 1.89% 1.36%
Life Insurance 5.11% 8.56%
Multiutilities. 1.84% 1.92%
IT - European Smaller Companies 1.79% 3.04%
IT - Asia Pacific Income 2.78% 3.73%
IT - Latin America 1.46% 1.71%
IT - Global Emerging Markets 1.44% 0.77%
IT - Property - UK Commercial 2.25% 1.87%
IT - Infrastructure 1.35% 1.32%
Retail REITs 1.28% 1.12%
Banks 1.92% 1.88%
Household Goods & Home Construction 1.10% 2.54%
Mobile Telecommunications 1.10% 1.44%
Media. 0.76% 1.22%
Financial Services 1.17% 2.08%
Travel & Leisure 0.75% 0.00%
Industrial & Office REITs 0.66% 0.73%
Mining. 0.63% 1.64%
Electricity 0.41% 0.44%
Nonlife Insurance 0.41% 0.71%
Total 100.00% 100.00%

Note: 1...'Value %Total' is the portfolio value of the share as a % of the total portfolio
2...'Div %Total' is the expected dividend of the share based on forecast yield
as a % of the total portfolio expected dividend

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Re: Jam's HYP - First Outing as of 11th June 2022

#506581

Postby Itsallaguess » June 12th, 2022, 6:58 am

Jam1 wrote:
                                                                                 Value     Div    Fcst 
Share Epic Sector %Total %Total Yield

North American Income Trust NAIT IT - North America 15.86% 11.79% 3.50%


NAIT is the result of a long-term regular investment, now stopped, but continues to growth through dividend reinvestment.


Hi Jam1,

Just a couple of stand-out points from taking a look at your income-portfolio report -

As a general rule I don't think setting up automatic dividend reinvestments are a good way to help investors manage a long-term buy and hold income-portfolio.

I would imagine it would be really quite rare at any given time for the most appropriate route for 'building phase' dividend income to simply be automatically recycled back into the company paying you it's dividend, and just taking your current portfolio capital and income diversification into account, we can see why this is the case with your NAIT holding above, where an already-large capital allocation and income-delivery portion would then continue to grow even more disproportionally were you to continue with automatic dividend re-investment for that particular holding...

Also, automatically recycling a relatively large dividend income back into a NAIT holding that's only currently offering a 3.5% yield, in an income-portfolio with an overall running yield of 4.71%, is actually diluting that portfolio yield over time, in a way that would be less striking were those regular dividend payments re-invested back into higher-yielding opportunities, with yields closer to or even above your overall portfolio running yield...

In addition to those points though, there's also other good reasons for simply allowing all portfolio-level dividend payments to pool into a single cash holding until it's grown to be of a size that's then suitably efficient from a dealing-fee point of view to either then top up the most appropriate existing holding at that point, or look to purchase a new holding if that's what you might wish to do.

Taking that approach will not only help to avoid creating an even more uneven weighting in your NAIT holding above, but would also -

  • Help to create regular opportunities to manage and re-balance existing portfolio weightings (capital or income) in a more even approach that suits your overall portfolio over long time-scales
  • Help you to take 'market cycle opportunities' where regular share-price fluctuations in existing holdings can often offer up good yields on existing lower-weighting holdings, thus helping to create portfolio balancing opportunities at the same time as making the most efficient use of that pooled cash from a 'yield-opportunity' point of view
  • Helps to create fairly regular 'portfolio management' touch-point opportunities, which then helps to avoid the sort of long-term 'portfolio drift' that can occur with automatic dividend reinvestment processes...

In terms of how large a 'pooled dividend cash' holding might need to get to, so as to allow it to be efficient enough for a more focussed manual re-investment, I tend to at the very least make sure that all associated re-investment trading costs are less than 1% of a particular trade, so taking a rough view on that, we might get to something like £2000, depending on your particular broker charges.

The only other observation I'd make regarding your current holdings would be to note that there's a section of rump-holdings towards the bottom that might be worth either letting go for the sake of portfolio tidiness, or bulking up at some stage to allow them to play a more meaningful part in things.

With eleven individual low-weight holdings delivering just 8% of overall income, and with you still currently in the 'building phase' of your investment life, then if you're not going to top any of those holdings up, I'd perhaps suggest a strong-handed 'one in - one out' approach if you decide to add any new income-holdings to your current list, which would at least then help you to manage those very low-weight holdings over the long-term in a more beneficial way...

Overall though - things look fine, and with just a little more focus on where you can help yourself to create long-term 'portfolio management' opportunities, I think you'll do well to just stick with your current approach and keep focussed on those long-term goals...

Cheers,

Itsallaguess

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Re: Jam's HYP - First Outing as of 11th June 2022

#506583

Postby Itsallaguess » June 12th, 2022, 7:16 am

Jam1 wrote:
I hold a range of ITs, and from a HYP perspective, assume overseas ITs maybe justified, but the UK standards such at MUT and MRCH may not be?


Just regarding that separate point, I think it's probably worth highlighting the HYP Practical Guideline below that specifically mentions income Investment Trust holdings -

  • When reporting on a HYP portfolio, there may be times when it is impractical to exclude overseas shares, Investment Trusts, or preference shares. In such circumstances, these shares can be included within a published portfolio if they make up no more than circa 5%. They must NOT be discussed on this board.

HYP Practical Guidelines - https://www.lemonfool.co.uk/viewtopic.php?f=15&t=23846

With your reported income-portfolio, very much like my own, holding quite a few income-IT's, I suspect it would have been better for the thread to have been posted on the High Yield Shares & Strategies - General board linked below, where the particular types of HYP Practical restrictions mentioned above do not apply -

High Yield Shares & Strategies - General - https://www.lemonfool.co.uk/viewforum.php?f=31

Hopefully if this is an issue then this thread can just be moved over to that board without too much drama...

Cheers,

Itsallaguess

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Re: Jam's HYP - First Outing as of 11th June 2022

#506584

Postby Dod101 » June 12th, 2022, 7:42 am

Thanks for posting your portfolio. It looks like a work in progress, given the new additions you have recently made. I have just taken a profit on my Shell holding and would suggest that you might like to on both it and BP, using the proceeds to bulk up some of your newer holdings such as SSE and Admiral.

I live off my dividends so I withdraw most of them. The idea of reinvesting them back into the same company is not an issue for me. Neither have I seen this discussed much, but on the whole, I see no reason why not provided it is a holding you wish to keep adding to. I would not be quite as negative about the idea as Itsallaguess, as it is a cheap way of adding to a holding.

Being an investment trust, I can see that you are less concerned about the concentration in NAIT than you might be if it were an individual share but even so, you are placing a lot of faith in its management and personally I would feel uncomfortable with so much in one holding, but who is to say that you are wrong?

You have about 50 holdings. I do not have that many, in fact only 30 or so including a few ITs. Apart from those small holdings which are newly acquired you have a number of other very small holdings and I would cull these or bulk them up, depending on how you feel about the share. Your average holding if it were an even spread would be 2%. Mine is a little over 3%. I am comfortable with holdings of up to twice that, depending on the company, but most of my holdings are in the range of 3% plus/minus 1.5%. Adding new holdings to a portfolio to avoid the effect of another Carillion is a very negative and inefficient way of dealing with that risk. I have so far avoided such problems by keeping a very close watch on my holdings and as I have chronicled elsewhere never in a million years would I have invested in a contractor like Carillion. However, investing involves risk.

I will not comment on individual holdings except to say that holding both of say Murray Income and Merchants is surely duplication to a large extent and may be illustrated by the fact that their yields are almost the same. You do not need both and that probably applies to other holdings as well.

I think therefore that you ought to take a more disciplined approach, and decide which of your many holdings you really want to keep, consider ditching the rest and then keep a close watch on those that remain.

Good luck anyway.

Dod

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Re: Jam's HYP - First Outing as of 11th June 2022

#506591

Postby csearle » June 12th, 2022, 9:04 am

Jam1 wrote:Good Evening.
Welcome to The Lemon Fool! C.

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Re: Jam's HYP - First Outing as of 11th June 2022

#506596

Postby MrFoolish » June 12th, 2022, 9:37 am

Dod101 wrote:I will not comment on individual holdings except to say that holding both of say Murray Income and Merchants is surely duplication to a large extent and may be illustrated by the fact that their yields are almost the same. You do not need both and that probably applies to other holdings as well.

Dod


I don't see why it makes any difference. Provided there's no frequent trading of them, holding multiple ITs has no additional cost to holding one.

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Re: Jam's HYP - First Outing as of 11th June 2022

#506602

Postby Dod101 » June 12th, 2022, 9:58 am

MrFoolish wrote:
Dod101 wrote:I will not comment on individual holdings except to say that holding both of say Murray Income and Merchants is surely duplication to a large extent and may be illustrated by the fact that their yields are almost the same. You do not need both and that probably applies to other holdings as well.

Dod


I don't see why it makes any difference. Provided there's no frequent trading of them, holding multiple ITs has no additional cost to holding one.


Indeed. I never said it did but it is not holding multiple ITs that I am commenting on it is the fact they are both holding higher yielding UK shares, and there is only a limited pool on which to draw so there is likely to be duplication, not only between the two ITs, but also with directly held shares as well.

Dod

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Re: Jam's HYP - First Outing as of 11th June 2022

#506605

Postby MrFoolish » June 12th, 2022, 10:14 am

Dod101 wrote:Indeed. I never said it did but it is not holding multiple ITs that I am commenting on it is the fact they are both holding higher yielding UK shares, and there is only a limited pool on which to draw so there is likely to be duplication, not only between the two ITs, but also with directly held shares as well.

Dod


Yep. But sometimes you can spot an IT at a decent discount to NAV, so this could be a plausible time to buy one you didn't already own. Buying at a good discount is yield enhancing.

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Re: Jam's HYP - First Outing as of 11th June 2022

#506617

Postby 88V8 » June 12th, 2022, 11:00 am

MrFoolish wrote:
Dod101 wrote:...there is only a limited pool on which to draw so there is likely to be duplication, not only between the two ITs, but also with directly held shares as well.

Yep. But sometimes you can spot an IT at a decent discount to NAV, so this could be a plausible time to buy one you didn't already own. Buying at a good discount is yield enhancing.

Only at the time of purchase.
After that the yield is what it is.

Dod is right about duplications. I am guilty of the same. I hope that the inevitable diversities arising from the approaches of the different IT managers, offset the duplications, but I am probably kidding myself.

V8

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Re: Jam's HYP - First Outing as of 11th June 2022

#506618

Postby moorfield » June 12th, 2022, 11:01 am

Jam1 wrote:
                                                                                 Value     Div    Fcst 
Share Epic Sector %Total %Total Yield


Merchants Trust MRCH IT - UK Equity Income 2.82% 2.99% 5.00%
Murray Income Trust MUT IT - UK Equity Income 3.47% 3.02% 4.10%

BP BP Oil & Gas Producers 9.13% 7.95% 4.10%
Shell SHEL Oil & Gas Producers 7.87% 5.85% 3.50%
Unilever ULVR Food Producers 4.92% 4.18% 4.00%
GlaxoSmithKline GSK Pharmaceuticals & Biotechnology 4.26% 2.72% 3.00%
AstraZeneca AZN Pharmaceuticals & Biotechnology 2.36% 1.20% 2.40%
BAE Systems BA Aerospace & Defence 1.89% 1.36% 3.40%
National Grid NG Multiutilities. 1.84% 1.92% 4.90%
British Land Company BLND Retail REITs 1.28% 1.12% 4.10%
Tate and Lyle TATE Food Producers 1.26% 0.67% 2.50%
Marston's MARS Travel & Leisure 0.75% 0.00% 0.00%
HSBC Holdings HSBA Banks 0.48% 0.45% 4.50%
Standard Chartered STAN Banks 0.34% 0.17% 2.40%

Portfolio Running Yield = 4.71%





Hi Jam

Why are you holding, for income, all of these individual companies yielding less than the two UK Equity ITs which also hold them ? (most of) Why not simply roll them into ITs and ratchet up overall income and dilute risk of holding even more ?

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Re: Jam's HYP - First Outing as of 11th June 2022

#506629

Postby MrFoolish » June 12th, 2022, 11:48 am

88V8 wrote:
MrFoolish wrote:
Dod101 wrote:...there is only a limited pool on which to draw so there is likely to be duplication, not only between the two ITs, but also with directly held shares as well.

Yep. But sometimes you can spot an IT at a decent discount to NAV, so this could be a plausible time to buy one you didn't already own. Buying at a good discount is yield enhancing.

Only at the time of purchase.
After that the yield is what it is.


It secures you more underlying assets for your money which should in turn secure you a higher dividend stream going forward. I think you know what I meant.

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Re: Jam's HYP - First Outing as of 11th June 2022

#506638

Postby monabri » June 12th, 2022, 12:24 pm

I don't buy into point 5. The more you scatter the net, the greater the risk you'll inadvertently catch a Carillion. In that case, why not just have 1 set of costs and buy a basket of shares with a reasonable yield? I suspect that decision to buy into IGG and ADM is driven by their recent turn down in shareprice and corresponding trailing yield value? I don't know if that applies equally to SSE, especially with their intention to reduce the dividend (again).

I also propose that MUT and MRCH are worth holding in tandem. I take the following from the latest available company factsheets. There's not much
overlap in their top 10 holdings ( SSE). Merchants yield is currently about 25% higher, gearing is similar but there is a 5% discount to NAV"on offer" with MUT. I'm trying to sell the dual holding primarily on relative content of holdings, though.

MRCH
GlaxoSmithKline 5.3
British American Tobacco 4.2
Imperial Brands 4.1
Shell 3.9
Scottish & Southern Energy 3.2
Rio Tinto 3.2
BAE Systems 3.1
IG Group 3.1
Drax Group 3.0
Tate & Lyle 2.9


MUT
AstraZeneca 5.7
Diageo 5.3
RELX 4.1
BHP 3.6
SSE 3.4
TotalEnergies 2.9
Anglo American 2.7
Unilever 2.5
Safestore 2.3
National Grid 2.3
Standard Chartered 2.2
Drax 2.1
Rentokil Initial 2.0
Inchcape 2.0
Close Brothers 2.0
BP 1.9
Marshalls 1.9
Croda 1.9
Novo-Nordisk 1.8
Euromoney Institutional Investor 1.8


I'd also like to decide where dividends are reinvested offering me the opportunity to top up/add shares if I think they are attractive based on HYP principles ( yield , sustainability, divi growth). However, I also try to keep an eye on other areas with a view to long term total return.

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Re: Jam's HYP - First Outing as of 11th June 2022

#506667

Postby Jam1 » June 12th, 2022, 2:10 pm

Thank you all for your considered responses. A few reflections given that feedback.

1. Whilst I am comfortable with the scale of the holding in NAIT, I will stop the automatic dividend reinvestment and reinvest within the wider portfolio, which will help balance this over time, as noted by Itsallaguess.
2. I will moderate the holdings in BP and Shell, as has Dod in the case of Shell, and again use this to rebalance the portfolio, albeit I may remain overweight to some extent (to hedge the pain at the petrol pump!).
3. I will sell off holdings I do not intend to top up, exemplified by STAN.
4. As noted by MrFoolish, I have invested in ITs when discounts vary beyond traditional levels. However, it is the moorfield’s question and that echoed by Dod in regards to equity duplication that I find most challenging - why hold HYP shares with yields below that of a UK equity income IT such as MRCH?

The current portfolio reflects my varying confidence in a HYP approach, which is observable given by LTBH mentality. So it appears I cannot answer the question despite a decade of investment!

One response is that I may (mistakenly) believe I can time the market, which justified my investment in BP and Shell during the second year of the pandemic, and yes the recent inclusion of ADM and IGG. Of course this runs counter to my response to monabri - if I cannot distinguish between the sustainability/competitiveness of say, ADM and DLG, should I not simply invest in both, if not I may pick the ‘dud’ given strategic ignorance and if it only represented a small percentage of the portfolio has less material impact. Of course, the attempt at timing the market is presumably primarily focused on capital appreciation rather than income, at least where such investments are extremely overweight.

If one approached the question from a binary perspective - should one chose to develop a HYP and avoid UK equity income ITs, or invest in those ITs but only invest in additional higher yielding HYP shares than the IT? Would that result in a higher risk HYP portfolio (given one is chasing yield) and a sectorial biased one, e.g. financial services? If so, would the argument run that this risk is offset by the UK Equity income IT holdings? Presumably one could consider this if one presented the portfolio of the IT alongside that of the individual HYP shares.

I wonder if this question though is due to my presentation. Do (some) individuals following the HYP strategy also hold a basket of ITs, including UK Equity Income ITs, but keep these portfolios segregated, and are quite happy with this dilemma?

5. After Dod’s comment regarding MUT and MRCH duplication, I also looked (for the first time critically) at the top then holdings (approx 40% of portfolios) and as monabri notes, interesting there is limited duplication with just SSE.

Apologies if this is a confused reply!

Thank you all again.

Jam (tomorrow).

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Re: Jam's HYP - First Outing as of 11th June 2022

#506677

Postby Dod101 » June 12th, 2022, 3:08 pm

Just to pick up on the point re duplication (or not!) between Merchants and Murray Income, whilst they both seem to have more or less the same objective they appear to see different ways of getting there so you may be right, that is worth holding both ITs. Nothing is written in stone with investing and Jam must distil what he feels comfortable with from the various comments made.

Dod

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Re: Jam's HYP - First Outing as of 11th June 2022

#506684

Postby moorfield » June 12th, 2022, 3:59 pm

Jam1 wrote:However, it is the moorfield’s question and that echoed by Dod in regards to equity duplication that I find most challenging - why hold HYP shares with yields below that of a UK equity income IT such as MRCH?


It's a question I like to pose often here! I normally use CTY (City of London IT) as a yield benchmark that a HYP share should be aiming to beat (the groupthink answer is the FTSE100 yield, but in my view that overlooks the elephants in the room that are ITs). AZN in your portfolio is a good example currently, it's price has been at an all time high (and thus it's yield at an all time low) for some time - it would not feature in a new HYP bought today and presumably you have held it for some time and could crystallize the capital gain made to both easily double the income generated and dilute the risk of an AZN dividend cut. So why continue to hold it, for income ?

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Re: Jam's HYP - First Outing as of 11th June 2022

#506764

Postby Itsallaguess » June 13th, 2022, 6:58 am

Jam1 wrote:
If one approached the question from a binary perspective - should one chose to develop a HYP and avoid UK equity income ITs, or invest in those ITs but only invest in additional higher yielding HYP shares than the IT?

Would that result in a higher risk HYP portfolio (given one is chasing yield) and a sectorial biased one, e.g. financial services?

If so, would the argument run that this risk is offset by the UK Equity income IT holdings?

Presumably one could consider this if one presented the portfolio of the IT alongside that of the individual HYP shares


As someone with a current mix of 'legacy' single-share UK-market HYP holdings, sat alongside a more recent and larger group of diverse (global geography and sector) income-IT components, I tend to visualise my set of remaining UK-market single-share holdings as 'my own UK-market IT'.

As my other IT-holdings have grown over the years, both in numbers and individual weightings, that 'personal UK-market IT' has become much less dominant in terms of income-delivery, to the point where I really don't see any great advantage in holding those individual UK-market holdings, and if they were all to get sold tomorrow and replaced with a pair of UK-focussed income-IT equivalents, then the overall effect on my wider income-portfolio is likely to be fairly negligible, other than helping to create a much neater and less labour-intensive income-portfolio for me...

And so that's really why over the last number of years, I've been taking advantage of selling down my existing single-share UK-market holdings, and moving things over to IT-equivalents as and when circumstances allow, such as new tax-year ISA and CGT allowances etc..

Ultimately, I'll be quite content when the UK-market sector of my income-portfolio is, like all the other non-UK sectors of it, much more simply represented by a small number of UK-focussed Investment Trusts...

There will, of course, be some level of UK-sector income given up by adding a level of IT management fees into that portfolio structure, when compared to holding a wider group of UK-market single-share holdings, but when viewed at whole-portfolio level, that will be a relatively small price to pay for me to be rid of the more granular hands-on management that single-share holdings require, ultimately leaving me with a very much more 'hands-off' set of income-IT's that is much more in line with how I really want to run my long-term income-portfolio...

Cheers,

Itsallaguess

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Re: Jam's HYP - First Outing as of 11th June 2022

#506780

Postby Dod101 » June 13th, 2022, 7:49 am

Itsallaguess wrote:
Jam1 wrote:
If one approached the question from a binary perspective - should one chose to develop a HYP and avoid UK equity income ITs, or invest in those ITs but only invest in additional higher yielding HYP shares than the IT?

Would that result in a higher risk HYP portfolio (given one is chasing yield) and a sectorial biased one, e.g. financial services?

If so, would the argument run that this risk is offset by the UK Equity income IT holdings?

Presumably one could consider this if one presented the portfolio of the IT alongside that of the individual HYP shares


As someone with a current mix of 'legacy' single-share UK-market HYP holdings, sat alongside a more recent and larger group of diverse (global geography and sector) income-IT components, I tend to visualise my set of remaining UK-market single-share holdings as 'my own UK-market IT'.

As my other IT-holdings have grown over the years, both in numbers and individual weightings, that 'personal UK-market IT' has become much less dominant in terms of income-delivery, to the point where I really don't see any great advantage in holding those individual UK-market holdings, and if they were all to get sold tomorrow and replaced with a pair of UK-focussed income-IT equivalents, then the overall effect on my wider income-portfolio is likely to be fairly negligible, other than helping to create a much neater and less labour-intensive income-portfolio for me...

And so that's really why over the last number of years, I've been taking advantage of selling down my existing single-share UK-market holdings, and moving things over to IT-equivalents as and when circumstances allow, such as new tax-year ISA and CGT allowances etc..

Ultimately, I'll be quite content when the UK-market sector of my income-portfolio is, like all the other non-UK sectors of it, much more simply represented by a small number of UK-focussed Investment Trusts...

There will, of course, be some level of UK-sector income given up by adding a level of IT management fees into that portfolio structure, when compared to holding a wider group of UK-market single-share holdings, but when viewed at whole-portfolio level, that will be a relatively small price to pay for me to be rid of the more granular hands-on management that single-share holdings require, ultimately leaving me with a very much more 'hands-off' set of income-IT's that is much more in line with how I really want to run my long-term income-portfolio...

Cheers,

Itsallaguess


There are other factors to consider (at least for most investors) than simply ease of admin. There is a lower risk profile but in return for that the investor is depriving himself of the ability to take advantage of any surge in the price of an individual share such as Shell currently, where I have just topped it in order to get at least as good an income elsewhere and thus locked in some capital gain and added a bit more diversification. It is not often that we get the run that Scottish Mortgage had in 2020/21. IAAG has acknowledged the other factor which is the fees charged by individual ITs. However the system works, as was demonstrated over many years by London & St Lawrence which ran a portfolio of ITs very successfully.

I prefer the 'mixed' approach that he currently is adopting although as I have said, with a deal of tidying up. It is up to Jam to decide which approach suits him best though.

Dod

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Re: Jam's HYP - First Outing as of 11th June 2022

#506781

Postby Itsallaguess » June 13th, 2022, 7:59 am

Dod101 wrote:
There are other factors to consider (at least for most investors) than simply ease of admin.

There is a lower risk profile but in return for that the investor is depriving himself of the ability to take advantage of any surge in the price of an individual share such as Shell currently, where I have just topped it in order to get at least as good an income elsewhere and thus locked in some capital gain and added a bit more diversification.

It is not often that we get the run that Scottish Mortgage had in 2020/21.


For me personally though Dod, you've answered this particular question with your final statement - 'it is not often'....

Compare that to how often we hear about the really poor single-share HYP performers. We could spend all day discussing those, and for me personally I'd see that down-side list as being much more detrimental over the longer term than might be compensated by the appearance of the odd Shell opportunity...

Just my view, but on balance over many years, I found that single-share HYP holdings were simply too much hassle for someone like me who was looking for a much quieter and more resilient income-portfolio that didn't seem to actively chase so many 'accidents'...

Cheers,

Itsallaguess

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Re: Jam's HYP - First Outing as of 11th June 2022

#506786

Postby Dod101 » June 13th, 2022, 8:14 am

Itsallaguess wrote:
Dod101 wrote:
There are other factors to consider (at least for most investors) than simply ease of admin.

There is a lower risk profile but in return for that the investor is depriving himself of the ability to take advantage of any surge in the price of an individual share such as Shell currently, where I have just topped it in order to get at least as good an income elsewhere and thus locked in some capital gain and added a bit more diversification.

It is not often that we get the run that Scottish Mortgage had in 2020/21.


For me personally though Dod, you've answered this particular question with your final statement - 'it is not often'....

Compare that to how often we hear about the really poor single-share HYP performers. We could spend all day discussing those, and for me personally I'd see that down-side list as being much more detrimental over the longer term than might be compensated by the appearance of the odd Shell opportunity...

Just my view, but on balance over many years, I found that single-share HYP holdings were simply too much hassle for someone like me who was looking for a much quieter and more resilient income-portfolio that didn't seem to actively chase so many 'accidents'...

Cheers,

Itsallaguess


I should have acknowledged that there is what some might see as a lot of work in handling a 'mixed' portfolio. I am long retired and so have the time and enjoy it. I also have what I think is a fairly conservative outlook and so avoided the disasters of the last few years. Mind you, I have also avoided the boom in housebuilders and miners, seeing both of these as too cyclical for my liking. More fool me it would seem! Ironically I probably have some exposure through some of my ITs.

Dod

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Re: Jam's HYP - First Outing as of 11th June 2022

#506790

Postby moorfield » June 13th, 2022, 8:23 am

Dod101 wrote:
There are other factors to consider (at least for most investors) than simply ease of admin. There is a lower risk profile but in return for that the investor is depriving himself of the ability to take advantage of any surge in the price of an individual share such as Shell currently,


Hmm, the opposite is also true. Not so long ago Shell remember was priced higher than it was now, and paid a much higher dividend. I suspect many long term holders might still be sitting on a capital loss. I could also add to the list VOD, IMB, HSBA... the list goes on... My sense is that ITs especially bought below NAV have less volatile share prices and dividends.


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