The FTSE failing five

[Lootman]

If Amazon seriously tilt at the UK grocery market, companies like Sainsbury will need to find a way to stay alive on even thinner margins. CV19 has encouraged a lot more people to try online grocery shopping and now would look like a great opportunity for Amazon to buy a large chunk of that market and grow it. Maybe free same day delivery with a Prime account (rather than having to book a slot weeks in advance)? I don't see any of the UK super-markets being able to compete without major changes to their businesses.

That is what Amazon is doing in the US, with its purchase of WholeFoods. It now has a Amazon Fresh division which offers free 2-hour delivery on food items, in cities anyway.

There are a few WholeFoods in the UK, mostly in London, but not enough to provide a national service unless they built a few food warehouses around the country.

Oddly WholeFoods was a premium, high-end grocery chain rather than a low-margin mass seller, so Amazon's strategy has a bigger focus on quality than price. That might save the UK grocers. Waitrose might be the one to suffer in that case but that's not public anyway. Bad news for M&S perhaps?

[monabri]

LGEN - legal & general was available at under £1 around 2008 and 2011 .

one of the few non failures .

LGEN was also "available" at 138p this year (possibly slightly cheaper) and has returned 17.5p in dividends since. Current price ~224p recovering after paying no deference to Mr Woods.

[Bubblesofearth]

In the TImes this morning there is an article commenting on the failing five. They could also be called the famous five I suppose. They are Sainsbury, BP, BT, Vodafone, and Lloyds which as the commentator says are household names and may well one way or another be in most investors' portfolios. The point he makes is that the share price today for each of them is very much lower than it was 20 years ago, thus destroying shareholder value in a big way.

He tells us we could add NatWest (RBS that was), Aviva, RSA, Barclays, Pearson, HSBC, IAG, Standard Chartered and Royal Dutch Shell. I could also have added at least the two tobacco companies. Pretty depressing stuff.

The late Sir John Harvey-Jones of ICI (another failed share) apparently once said 'Business is often about killing your favourite children to allow others to succeed.' Not a very attractive way to put it but I can see what he is saying.

As it happens they are all or at least were all high yielding shares. Maybe that is telling us something.

Dod

Tells us the author of the article is very good at selecting shares that have already fallen. Embellish a bit with 'household names' (whatever that means) and make a story out of it. If that's the level of financial journalism these days then I'm glad I don't bother reading the papers any more.

It would be just as easy to select 5 high performing shares over the last 20 years that are also 'household names'.

As is pointed out elsewhere the FTSE 100 is lower than 20 years ago. A few comments on that;

1. It's a lot higher with dividends reinvested.

2. The FTSE 250 is significantly higher than it was 20 years ago.

3. Most equal weight portfolios taken from the FTSE 100 are higher than 20 years ago - evidenced from numerous HYP's hereabouts.

4. You would have had to invest in a FTSE 100 tracker at exactly the peak of the market to have experienced the loss.

I wonder if anyone on these boards is actually sitting on a loss having invested in UK shares over the last 20 years? Genuinely curious because I would be very surprised.

BoE

[Adamski]

The UK is not an attractive place for investors because of slow growth and not much of a growth or technology sector. Plus with market sentiment over Brexit and being badly hit by Coronavirus (UK economy shrunk by a fifth), the outlook does not look great. There are a lot of loss making zombie companies (I've worked at a couple) and a workforce which has low productivity. However, there is still a lot of great places to live and work here, there is a Great Britain in the beautiful countryside, towns and villages. But I cannot see the investment landscape changing in the short term. Which is why we all need a high international component in our investment portfolios.

[johnhemming]

A lot of the US tech stocks are ludicrously over valued. Tech is an odd business sector. Perhaps block chain is the oddest. In the end businesses need to make profits. (Much that I have worked in tech for a long time).

[Lootman]

3. Most equal weight portfolios taken from the FTSE 100 are higher than 20 years ago - evidenced from numerous HYP's hereabouts.

From what I have seen many of the HYPs presented here are equal weight in name only, in that they may start out that way but quickly deviate from being equal-weighted. Whereas true equal-weighted portfolios are rebalanced regularly to ensure that equal weighting is maintained.

On the one extreme you have the HYP1 prototype that, after nearly 20 years, is very concentrated and not remotely equal-weighted any more. It is dominated by half a dozen holdings.

Whilst on the other had you have TJH's effort, where some semblance of equal-weighting is retained by rebalancing.

I agree with your broader point that excluding dividends makes a huge difference in a market like the UK that seems to be biased towards high payout ratios. But that is also a criticism of the UK market - that in its zeal to provide an "income" to the investors who crave yield, the UK market is destined to produce no growth of capital for long periods of time. In a sense UK returns are annuity--like, front-loaded to emphasise dividends, with all that that implies.

By contrast, for example, the S&P 500 is more than double its 1999 peak, with a currency kicker as well. The Nasdaq is even more impressive: If you had bought the QQQ at the very peak of the dotcom boom, you still would have nearly tripled your capital to date. All numbers are without dividends.

A lot of the US tech stocks are ludicrously over valued.

People were saying that when Amazon was at $800 and Apple was at $100! That was only 4/5 years ago.

[Breelander]

3. Most equal weight portfolios taken from the FTSE 100 are higher than 20 years ago - evidenced from numerous HYP's hereabouts.

4. You would have had to invest in a FTSE 100 tracker at exactly the peak of the market to have experienced the loss.

I wonder if anyone on these boards is actually sitting on a loss having invested in UK shares over the last 20 years? Genuinely curious because I would be very surprised.

Difficult to say when most of us have been building over those 20 years, but unitisation is one way to take that out of the equation. My HYP's building phase more or less ended at the end of 2011, which was when I unitised the portfolio as Income Units. An income unit does not include dividends so is directly comparable to the FTSE 100. I then retrospectively unitised back to Sept. 2001, that was as far as my records would allow. Here's a graph of Income Units vs. FTSE 100.

I'll leave the comments up to you, except to say that the Covid-19 crash looks minor in comparison to 2003 (Iraq war) or 2009 (financial crisis).

[dealtn]

The UK is not an attractive place for investors because of slow growth and not much of a growth or technology sector. Plus with market sentiment over Brexit and being badly hit by Coronavirus (UK economy shrunk by a fifth), the outlook does not look great.

...

But I cannot see the investment landscape changing in the short term. Which is why we all need a high international component in our investment portfolios.

Any reason, if that were true, that it wouldn't be reflected in the price then? Or do you think the outlook is obvious to you, but not to the market, and that the market is inefficient and wrong?

[johnhemming]

A lot of the US tech stocks are ludicrously over valued.

People were saying that when Amazon was at $800 and Apple was at $100! That was only 4/5 years ago.

I would think Apple is more risky than Amazon.

[Wizard]

Rather than rubbishing these English companies perhaps we should appreciate their loyalty to us shareholders, and dividends they have paid us over the years, and ignore the enemy within who are happy to take the money but at the first opportunity take every opportunity to drag them down.

No one I think is deliberately rubbishing them but an ability to keep paying dividends is no great attribute if they are largely being paid out of capital or borrowings. Investing is surely about total return not just about dividends especially where the share price has dropped dramatically over the last 20 years. None of the shares quoted could be said to have been a great success for a long while. Some no doubt will come good again, at least I hope they do, but the outlook is not brilliant as far as I can see.

To respond to Wizard, yes that is true, but we are discussing FTSE shares and what is wrong with the UK business environment.

Dod

My bold.

In which case is this the right board for such a broad macro economic topic?

[Dod101]

[
To respond to Wizard, yes that is true, but we are discussing FTSE shares and what is wrong with the UK business environment.

Dod

My bold.

In which case is this the right board for such a broad macro economic topic?

Oh dear! I do not know.

Dod

[tjh290633]

Tells us the author of the article is very good at selecting shares that have already fallen. Embellish a bit with 'household names' (whatever that means) and make a story out of it. If that's the level of financial journalism these days then I'm glad I don't bother reading the papers any more.

It would be just as easy to select 5 high performing shares over the last 20 years that are also 'household names'.

As is pointed out elsewhere the FTSE 100 is lower than 20 years ago. A few comments on that;

1. It's a lot higher with dividends reinvested.

2. The FTSE 250 is significantly higher than it was 20 years ago.

3. Most equal weight portfolios taken from the FTSE 100 are higher than 20 years ago - evidenced from numerous HYP's hereabouts.

4. You would have had to invest in a FTSE 100 tracker at exactly the peak of the market to have experienced the loss.

I wonder if anyone on these boards is actually sitting on a loss having invested in UK shares over the last 20 years? Genuinely curious because I would be very surprised.

BoE

All my evidence suggests that I have beaten the Market over the last 20 years, and my unitised figures (income units)
compared with the FTSE100 to the same base are:

Yr to    HYP    FTSE   Difference   Ratio
Dec-99   1.00   1.00         0.0%    1.00
Dec-00   0.94   0.89         5.5%    1.06
Dec-01   0.87   0.75        15.3%    1.15
Dec-02   0.68   0.57        19.5%    1.19
Dec-03   0.78   0.65        21.1%    1.21
Dec-04   0.89   0.69        28.2%    1.28
Dec-05   1.08   0.81        33.4%    1.33
Dec-06   1.31   0.90        45.5%    1.46
Dec-07   1.22   0.93        31.1%    1.31
Dec-08   0.71   0.64        10.3%    1.10
Dec-09   0.94   0.78        20.2%    1.20
Dec-10   1.03   0.85        20.6%    1.21
Dec-11   1.09   0.80        35.4%    1.35
Dec-12   1.20   0.85        40.6%    1.41
Dec-13   1.42   0.97        45.7%    1.46
Dec-14   1.40   0.95        48.2%    1.48
Dec-15   1.42   0.90        57.7%    1.58
Dec-16   1.55   1.03        50.2%    1.50
Dec-17   1.61   1.11        45.3%    1.45
Dec-18   1.38   0.97        42.6%    1.43
Dec-19   1.57   1.09        44.3%    1.44
Aug-20   1.28   0.88        45.5%    1.46

The other comparison is of dividends/income unit compared with the RPI. The data are:

.             Ordinary    Rebased     RPI    
Year to      Divs/unit   Divs/unit   Rebased
05-Apr-88         2.86      100.00    100.00
05-Apr-89         2.72       94.81    112.28
05-Apr-90         4.24      147.94    122.89
05-Apr-91         5.42      189.25    130.75
05-Apr-92         7.52      262.34    136.35
05-Apr-93         6.91      241.32    138.11
05-Apr-94         6.27      218.85    141.65
05-Apr-95         7.48      261.07    146.37
05-Apr-96         7.38      257.48    149.90
05-Apr-97         8.40      293.36    153.54
05-Apr-98         8.88      310.04    159.72
05-Apr-99         8.46      295.34    162.28
05-Apr-00        11.33      395.51    167.09
05-Apr-01        11.73      409.64    170.04
05-Apr-02        13.02      454.50    172.59
05-Apr-03        12.10      422.26    178.00
05-Apr-04        11.62      405.63    182.42
05-Apr-05        12.07      421.42    188.21
05-Apr-06        13.12      458.13    193.03
05-Apr-07        14.04      490.19    201.77
05-Apr-08        24.32      849.07    210.22
05-Apr-09        21.17      739.15    207.76
05-Apr-10        11.06      386.20    218.86
05-Apr-11        16.71      583.44    230.26
05-Apr-12        17.46      609.34    238.21
05-Apr-13        19.91      694.93    245.09
05-Apr-14        20.47      714.45    250.29
05-Apr-15        21.33      744.60    253.44
05-Apr-16        21.67      756.58    256.78
05-Apr-17        24.93      870.11    265.82
05-Apr-18        29.23    1,020.51    274.75
05-Apr-19        29.25    1,020.97    283.10
05-Apr-20        31.57    1,102.06    284.38

There is the obvious dip in income in 2009-10 and the subsequent recovery. The latest dip does not feature. There was a big increase in 2008 because of a considerable number of shares being taken over, and replaced with shares with higher inyields.

TJH

[Wizard]

Tells us the author of the article is very good at selecting shares that have already fallen. Embellish a bit with 'household names' (whatever that means) and make a story out of it. If that's the level of financial journalism these days then I'm glad I don't bother reading the papers any more.

It would be just as easy to select 5 high performing shares over the last 20 years that are also 'household names'.

As is pointed out elsewhere the FTSE 100 is lower than 20 years ago. A few comments on that;

1. It's a lot higher with dividends reinvested.

2. The FTSE 250 is significantly higher than it was 20 years ago.

3. Most equal weight portfolios taken from the FTSE 100 are higher than 20 years ago - evidenced from numerous HYP's hereabouts.

4. You would have had to invest in a FTSE 100 tracker at exactly the peak of the market to have experienced the loss.

I wonder if anyone on these boards is actually sitting on a loss having invested in UK shares over the last 20 years? Genuinely curious because I would be very surprised.

BoE

All my evidence suggests that I have beaten the Market over the last 20 years, and my unitised figures (income units)
compared with the FTSE100 to the same base are:

Yr to    HYP    FTSE   Difference   Ratio
Dec-99   1.00   1.00         0.0%    1.00
Dec-00   0.94   0.89         5.5%    1.06
Dec-01   0.87   0.75        15.3%    1.15
Dec-02   0.68   0.57        19.5%    1.19
Dec-03   0.78   0.65        21.1%    1.21
Dec-04   0.89   0.69        28.2%    1.28
Dec-05   1.08   0.81        33.4%    1.33
Dec-06   1.31   0.90        45.5%    1.46
Dec-07   1.22   0.93        31.1%    1.31
Dec-08   0.71   0.64        10.3%    1.10
Dec-09   0.94   0.78        20.2%    1.20
Dec-10   1.03   0.85        20.6%    1.21
Dec-11   1.09   0.80        35.4%    1.35
Dec-12   1.20   0.85        40.6%    1.41
Dec-13   1.42   0.97        45.7%    1.46
Dec-14   1.40   0.95        48.2%    1.48
Dec-15   1.42   0.90        57.7%    1.58
Dec-16   1.55   1.03        50.2%    1.50
Dec-17   1.61   1.11        45.3%    1.45
Dec-18   1.38   0.97        42.6%    1.43
Dec-19   1.57   1.09        44.3%    1.44
Aug-20   1.28   0.88        45.5%    1.46

The other comparison is of dividends/income unit compared with the RPI. The data are:

.             Ordinary    Rebased     RPI    
Year to      Divs/unit   Divs/unit   Rebased
05-Apr-88         2.86      100.00    100.00
05-Apr-89         2.72       94.81    112.28
05-Apr-90         4.24      147.94    122.89
05-Apr-91         5.42      189.25    130.75
05-Apr-92         7.52      262.34    136.35
05-Apr-93         6.91      241.32    138.11
05-Apr-94         6.27      218.85    141.65
05-Apr-95         7.48      261.07    146.37
05-Apr-96         7.38      257.48    149.90
05-Apr-97         8.40      293.36    153.54
05-Apr-98         8.88      310.04    159.72
05-Apr-99         8.46      295.34    162.28
05-Apr-00        11.33      395.51    167.09
05-Apr-01        11.73      409.64    170.04
05-Apr-02        13.02      454.50    172.59
05-Apr-03        12.10      422.26    178.00
05-Apr-04        11.62      405.63    182.42
05-Apr-05        12.07      421.42    188.21
05-Apr-06        13.12      458.13    193.03
05-Apr-07        14.04      490.19    201.77
05-Apr-08        24.32      849.07    210.22
05-Apr-09        21.17      739.15    207.76
05-Apr-10        11.06      386.20    218.86
05-Apr-11        16.71      583.44    230.26
05-Apr-12        17.46      609.34    238.21
05-Apr-13        19.91      694.93    245.09
05-Apr-14        20.47      714.45    250.29
05-Apr-15        21.33      744.60    253.44
05-Apr-16        21.67      756.58    256.78
05-Apr-17        24.93      870.11    265.82
05-Apr-18        29.23    1,020.51    274.75
05-Apr-19        29.25    1,020.97    283.10
05-Apr-20        31.57    1,102.06    284.38

There is the obvious dip in income in 2009-10 and the subsequent recovery. The latest dip does not feature. There was a big increase in 2008 because of a considerable number of shares being taken over, and replaced with shares with higher inyields.

TJH

Maybe I am misunderstanding the figures, but the first table suggests to me that the value of each unit is up 28% over the period. Then the second table suggests the dividend per unit is up by more than 10 times over the same period. Is that right?

[tjh290633]

Maybe I am misunderstanding the figures, but the first table suggests to me that the value of each unit is up 28% over the period. Then the second table suggests the dividend per unit is up by more than 10 times over the same period. Is that right?

No, the first is calendar years, where the second is financial years. The dividends/unit were:

05-Apr-00 11.33
05-Apr-20 31.57

Which is just under 3 times.

TJH

[MrFoolish]

Can some of those that run a pure HYP please explain why they only invest in UK domiciled shares?

[Wizard]

Maybe I am misunderstanding the figures, but the first table suggests to me that the value of each unit is up 28% over the period. Then the second table suggests the dividend per unit is up by more than 10 times over the same period. Is that right?

No, the first is calendar years, where the second is financial years. The dividends/unit were:

05-Apr-00 11.33
05-Apr-20 31.57

Which is just under 3 times.

TJH

Ah, yes, I now see the second table started at '88 vs '99 for the first.

[Wizard]

Can some of those that run a pure HYP please explain why they only invest in UK domiciled shares?

Even many of those that run a pure HYP also run other portfolios which include non-UK investments directly or via ITs. Some recent polls suggest only a few on here run a pure HYP and no other non-UK investments.

[MrFoolish]

Can some of those that run a pure HYP please explain why they only invest in UK domiciled shares?

Even many of those that run a pure HYP also run other portfolios which include non-UK investments directly or via ITs. Some recent polls suggest only a few on here run a pure HYP and no other non-UK investments.

On this basis, anyone who holds a few UK shares for the long term is likely to have a HYP within it, without even knowing it!

[johnhemming]

Can some of those that run a pure HYP please explain why they only invest in UK domiciled shares?

I don't run a HYP although I do like stocks that pay a yield and often screen on yield to the extent that arguably I do run an impure HYP. I tend to invest substantially in UK listed securities because it is easier to get more information. However, I invest in stocks like BNC through their home market listings.

As a stock picker I need to be able find things out about the companies.

[Dod101]

Can some of those that run a pure HYP please explain why they only invest in UK domiciled shares?

I suppose the answer is because that is what the guidance on HYP Practical requires. I do not run a pure HYP so I may not be the best person to answer you though. Furthermore, until fairly recently one could run a high yield portfolio more or less following the guidance, using only UK shares with some success and without the hassle of moving to overseas shares.

Dod