What to top up and HYP strategy going forward

[TopOfDaMornin]

My strategy going forward is to top up shares that are still producing dividend and ignore the cutters. They will remain in the portfolio as I lack the ability to know if they will start paying dividend in the future. My basic knowledge of economic times like this, is that dividends return quickly and hence leaving these cutters in my portfolio may be my best option.


Any views on the next purchases? I would have about £12,000 to invest. I am still toying with the idea of selling some shares and investing elsewhere for capital growth (e.g. S&P500, or VWRL or ITs) and then investing in HYP later. (I am aware limited discussion of this is allowed on this board. Also, ITs are at the top of the Top Up list because of the small sum currently invested in them. I do consider them part of my HYP approach.)

The below output is taken from the HYP top up spreadsheet.

By Sector



By Sector Weightings


Top 15 Top Up Order

[Arborbridge]

I'm sorry to be beastly, but as regards ITs: "I do consider them part of my HYP approach" is a contradiction in terms.
ITs cannot be part of a HYP, so what you have isn't a HYP, whether you regard them as part of it or not

Even if they were, I'm not convinced that the topup table technique would be appropriate to collective investments.

Arb.

[88V8]

I would top up CTY or MRCH. They will see you through the dividend drought.

Alas, I do not agree that divis as a whole will return rapidly. Some will not return to their previous level for years, if at all, and I would be inclined to stick with ITs as your top-ups until the situation become clearer.

But this should really be posted on the HYSS board, as IT's are not a subject for discussion on HYPP, only Ords.

V8

[Dod101]

The OP seems to have things petty well covered with around 42 holdings so he should surely not buy any different share, although there quite a few that I wold not hold in any circumstances that I can foresee. On this Board we cannot discuss particular ITs but as a general observation, depending on how long the economy takes to recover, I doubt that he can rely on ITs to be unaffected by the dividend drought.

As to the HYP strategy going forward, well as most would tell him there is only one HYP strategy and it is well documented. Other high yield strategies need to be discussed on the other high yield board.

Dod

[Charlottesquare]

Other high yield strategies need to be discussed on the other high yield board.

Dod

Are you not on the Other High Yield Board already, this is General?

Moderator Message:
The thread has been moved from the Practical Board-TJH

[88V8]

.... I doubt that he can rely on ITs to be unaffected by the dividend drought.

Unless it is really grim, I think he can rely on CTY and MRCH and other income IT 'dividend heroes' who have a long uncut record to defend.
At least, I jolly well hope so.

V8

[Dod101]

.... I doubt that he can rely on ITs to be unaffected by the dividend drought.

Unless it is really grim, I think he can rely on CTY and MRCH and other income IT 'dividend heroes' who have a long uncut record to defend.
At least, I jolly well hope so.

V8

Well you may be right but I would not rely on them or any other share. Just look at Shell. it was defending a record since 1945, 75 years? And yet it substantially cut. It will probably get really grim, especially for those UK facing ITs like CTY and probably MRCH. I have sold Edinburgh IT with much the same exposure as CTY for just that reason.

Dod

[daveh]

I'm sorry to be beastly, but as regards ITs: "I do consider them part of my HYP approach" is a contradiction in terms.
ITs cannot be part of a HYP, so what you have isn't a HYP, whether you regard them as part of it or not

Even if they were, I'm not convinced that the topup table technique would be appropriate to collective investments.

Arb.

I disagree ITs can be part of a persons high yield portfolio (and now we are on the Stratagies Board they can be discussed in detail). I have now entered all my collectives into my HYPTUSS and have started to use it much more rigorously to decide my regular topups. Prior to recently I would consider if I was topping up a collective after looking at HYPTUSS to see if any of the the top 10 shares looked a sensible top up.

Personally I've just used collectives (ITs and ETFs) for my foreign diversification and have stuck to UK listed shares (Ordinaries and a couple of prefs) and not ITs the home component.

[dealtn]

I disagree ITs can be part of a persons high yield portfolio ...

Yes but that's a hyp not a HYP.

[Arborbridge]

I'm sorry to be beastly, but as regards ITs: "I do consider them part of my HYP approach" is a contradiction in terms.
ITs cannot be part of a HYP, so what you have isn't a HYP, whether you regard them as part of it or not

Even if they were, I'm not convinced that the topup table technique would be appropriate to collective investments.

Arb.

I disagree ITs can be part of a persons high yield portfolio (and now we are on the Stratagies Board they can be discussed in detail). I

First, I apologise for not realising we were on HYSS - but you confused matters by calling your portfolio a HYP, when it isn't. I'm sure you know what a HYP is, and it isn't a generic high yield portfolio

Arb.

[88V8]

I disagree ITs can be part of a persons high yield portfolio ...

Yes but that's a hyp not a HYP.

Indeed. Discussing ITs on HYPP is a capital crime.

V8

[daveh]

I'm sorry to be beastly, but as regards ITs: "I do consider them part of my HYP approach" is a contradiction in terms.
ITs cannot be part of a HYP, so what you have isn't a HYP, whether you regard them as part of it or not

Even if they were, I'm not convinced that the topup table technique would be appropriate to collective investments.

Arb.

I disagree ITs can be part of a persons high yield portfolio (and now we are on the Stratagies Board they can be discussed in detail). I

First, I apologise for not realising we were on HYSS - but you confused matters by calling your portfolio a HYP, when it isn't. I'm sure you know what a HYP is, and it isn't a generic high yield portfolio

Arb.

It wasn't me who called it a HYP it was the OP and I think the post started on HYP-P before being moved.

I call my portfolio an IP to avoid confusion these days.
My point was there is no reason a person can't include high yield collectives in their high yield portfolio if they so wish - they just can't post in detail about it on HYP-P.

Moderator Message:
Just to be clear, this thread started out on HYP-P, where it was clearly off-topic from the start, as most of you realised. So I moved it. For something so egregious, I don't always post a message, or leave a "shadow" topic (as they are called) on HYP-P. -- MDW1954

[Gengulphus]

I'm sorry to be beastly, but as regards ITs: "I do consider them part of my HYP approach" is a contradiction in terms.
ITs cannot be part of a HYP, so what you have isn't a HYP, whether you regard them as part of it or not

That's a bit harsh, as the HYP Practical guidance says "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.". Although the ITs in TopOfDaMornin's portfolio are 9 of the 42 holdings (i.e. about 21% of the number of holdings), they're so small individually that together, they only make up 4.61% of the portfolio's capital value and provide 4.87% of its forecast dividend income (the latter figure obtained by copying his table into a spreadsheet and doing some calculations on the "Expected Dividend" column).

So TopOfDaMornin's portfolio is within the rules for a published HYP on HYP Practical. Nevertheless, I do think it a good thing that the thread was transferred here, because answering TopOfDaMornin's questions within the "... [overseas shares, Investment Trusts, or preference shares] must NOT be discussed on this board." limitation was very hard! (I know - I tried on Thursday night and eventually gave up on the tangled verbiage that resulted, and went to bed instead!)

Even if they were, I'm not convinced that the topup table technique would be appropriate to collective investments.

I don't think there's any real problem about using it for collective investments - but there is for this sort of amalgam of two quite different types of investment. Basically, the HYPTUSS top-up table technique (which is essentially the "sum of rankings" technique designed by and still used by tjh290633) is intended for use on a portfolio of investments that one wants to weight roughly equally, but using some preference(s) between them to weight the more preferred shares somewhat more highly. In the case of it being used for a HYP, the preference is for shares with higher dividend yields: that's reflected in using the high-to-low ranking of dividend yields, and causes higher-yielding shares to be topped up more, until counterbalanced by the low-to-high ranking capital value of holdings ranking preferring the less topped-up holdings.

As TopOfDaMornin's portfolio stands, the IT holdings average a bit under 20% of the average of the HYP holdings, on both capital value of holding and forecast income of the holding. Is that strongly unequal weighting of the two different types of holding actually an aim, or is it just a temporary state of affairs, caused e.g. by only recently having started adding IT holdings and so not yet having invested as much as desired in them? (Not a question you or I or anyone else other than TopOfDaMornin can answer - but the answer, and more generally whether TopOfDaMornin wants the composition of the portfolio to shift in some direction (and if so, what direction), are essential inputs to the question of what to buy.)

If TopOfDaMornin's objective is that the ITs should eventually make up around 20-25% of the portfolio (i.e. roughly in proportion to them being 9 IT holdings out of 42), then the HYPTUSS top-up table technique is probably suitable for it as it stands: it would result in a lot of IT top-ups happening before any HYP top-ups, but that's exactly what is needed to move towards that objective as quickly as possible! If that is done, it will be a good idea to remember when looking at the sector weighting distribution that "Equity Investment Instruments" is not a proper industry sector - rather, it means "a mix of all the proper sectors, that is probably quite well spread between them, but can only be determined accurately by doing a separate analysis of the sector distribution of the ITs' underlying holdings". If one doesn't want to do that analysis, a rough adjustment would be to assume that the sector distribution of the ITs' underlying holdings is the same as that of the HYP holdings, which would result in the actual contribution of each sector other than "Equity Investment Instruments" being multiplied by 100%/(100%-(weighting of "Equity Investment Instruments")). With the combined weighting of the ITs rising to 20-25%, that adjustment would eventually be multiplying the other sectors' weightings by between 100%/80% and 100%/75%, i.e. increasing them by a quarter to a third. But as I've indicated, that's only a rough adjustment, and analysing the ITs' underlying holdings is needed to get an accurate view of the whole portfolio's sector distribution.

If instead TopOfDaMornin's objective is that the ITs should eventually make up a different proportion of the whole portfolio, I can see two ways the HYPTUSS top-up table technique could be used. One is just to regard the entire collection of investments not as making up a single portfolio, but two portfolios - one consisting of 33 HYP shares and the other of 9 IT shares - and apply the HYPTUSS top-up table technique separately to each of them after deciding how much of any additional sum invested to each of them. For example, if TopOfDaMornin's objective is that the ITs should eventually make up 10% of the whole portfolio, a plausible technique would be to decide that further investments will be split 50:50 between ITs and HYP shares until the combined IT weighting has risen to 10%, after which they'll be split 10:90 to maintain the proportions at roughly that level. So that would involve using £6k of the £12k available to top up HYP shares according to a HYPTUSS portfolio of only the 33 HYP shares, and the other £6k to top up IT shares according to a separate HYPTUSS portfolio of only the 9 IT shares.

The other way I can see that the HYPTUSS top-up table technique could be used would be to modify HYPTUSS to calculate an adjusted capital value for each holding, then calculate its top-up ranking from yield and adjusted capital value rankings in the same way that it currently does from yield and unadjusted capital value rankings (while still using the unadjusted capital values for all other purposes, such as reporting the total value of the portfolio). The point here is that the HYPTUSS top-up technique aims for equal capital weightings if all else is equal - "all else" being just the dividend yields, since only capital values and dividend yields enter into the top-up ranking calculation. So if I use an adjustment to pretend that holding X has say twice its actual capital value while all other holdings have don't apply any adjustment to their capital values, the modified technique will aim for the adjusted capital values all being equal if all else is equal - which is the same as aiming for holding X having half the capital value that all the other holdings have if all else is equal.

So if I wanted (all else being equal) the 9 ITs to be equally weighted with each other and to make up 10% of the whole portfolio's capital value, and the 33 HYP shares to be equally weighted with each other and to make up 90% of the whole portfolio's capital value, that would make each IT's all-else-equal weighting 10%/9 = 1.1111...% and each HYP share's all-else-equal weighting 90%/33 = 2.7272...%. So if I adjusted each IT's capital value by multiplying its actual capital value by 2.7272...%/1.1111...% = 2.4545... (*) while leaving the HYP shares' capital values unadjusted, the HYPTUSS top-up technique would be expected to aim for 10% ITs and 90% HYP shares, all else being equal (and for roughly that in normal all-else-not-so-equal situations).

I should finish by saying that this sort of modification of the HYPTUSS top-up technique is an idea that has only very recently occurred to me. I'm reasonably confident that it will work as intended, and am probably going to start using it myself in a rather different context (which I'll probably report on in due course on the HYP Practical board, as it is a purely-HYP context), but I haven't yet actually tested it. So use at your own risk!

(*) 2.5 would pretty clearly be close enough in practice!

Gengulphus

[Dod101]

Here we go again. It must have been the Covid induced lockdown. Rather than discuss the OP's problem and try to help, we are once again on to what can and cannot be included in a HYP. This used to be a Board discussing high yield strategies and the other, the blessed HYP. Now both Boards have become battle grounds for semantics. We had another case with IAAG and dealtn arguing between themselves rather than discussing the matter in hand over the last 24 hours.

It is a shame everyone gets so uptight about pointless and conclusionless argument.

Dop

[Itsallaguess]

If TopOfDaMornin's objective is that the ITs should eventually make up around 20-25% of the portfolio (i.e. roughly in proportion to them being 9 IT holdings out of 42), then the HYPTUSS top-up table technique is probably suitable for it as it stands: it would result in a lot of IT top-ups happening before any HYP top-ups, but that's exactly what is needed to move towards that objective as quickly as possible!

If that is done, it will be a good idea to remember when looking at the sector weighting distribution that "Equity Investment Instruments" is not a proper industry sector - rather, it means "a mix of all the proper sectors, that is probably quite well spread between them, but can only be determined accurately by doing a separate analysis of the sector distribution of the ITs' underlying holdings".

If one doesn't want to do that analysis, a rough adjustment would be to assume that the sector distribution of the ITs' underlying holdings is the same as that of the HYP holdings, which would result in the actual contribution of each sector other than "Equity Investment Instruments" being multiplied by 100%/(100%-(weighting of "Equity Investment Instruments")).

With the combined weighting of the ITs rising to 20-25%, that adjustment would eventually be multiplying the other sectors' weightings by between 100%/80% and 100%/75%, i.e. increasing them by a quarter to a third. But as I've indicated, that's only a rough adjustment, and analysing the ITs' underlying holdings is needed to get an accurate view of the whole portfolio's sector distribution.

On the subject of Investment Trust holdings being shown allocated to a sector of 'Equity Investment Instruments' in anyone's HYPTUSS tool, we've very recently implemented a change in that approach with the underlying HYPTUSS data, and have now adopted the AIC sector-allocations for all Investment Trusts currently listed in it. This improvement was primarily to help with exactly the type of problem being discussed above.

This improvement now means that anyone with IT holdings in their HYPTUSS would see a much-improved level of sector granularity for them, which not only feeds through to benefit the above issue, but also positively impacts other processes in the tool such as the 'Sector Weighting' functionality, as shown in the demo portfolio chart below -



If anyone wishes to implement this improvement themselves, then the HYPTUSS tool 'Company Data Sheet' information should be over-written with the latest data held here -

http://lemonfoolfinancialsoftware.weebly.com/uploads/2/3/5/1/23511186/company_data_sheet.txt

Please note that anyone wishing to implement this improvement who may hold personally-modified data on that sheet will need to remember to re-copy over any personal additions or modifications as well...

A separate thread on this specific improvement is linked below, so if there's any questions regarding it then it would probably be best to use that thread rather than this one -

https://www.lemonfool.co.uk/viewtopic.php?f=27&t=24947

Cheers,

Itsallaguess

[Gengulphus]

... Rather than discuss the OP's problem and try to help, ...

I'm afraid it's a bit hard to do that, because while TopOfDaMornin has said "I do consider [ITs] part of my HYP approach.", they are an awkward case because they're really investments across a spread of industry sectors, and so aren't all that easy to fit into the traditional HYP approach of concentrating on high yields, dividend safety and sector diversification, with each company assigned to a specific sector (*). There are various ways to approach fitting it in - two standard ways are keeping inaccuracies in the sector diversification picture you get small by only having a low weighting of the ITs collectively, or recognising that this is a fundamental difference between managing non-IT and IT shares in a portfolio and so adopting different ways of running the two parts of the portfolio. TopOfDaMornin might have either of those two in mind, or indeed some other method - but I at least need to know how he or she considers ITs to be part of the approach being used to be able to produce relevant help without also producing a whole lot of irrelevant stuff.

For instance, my last post has some suggestions about how to use the HYPTUSS top-up table if TopOfDaMornin sees the ITs as eventually making up the 20-25% of the entire portfolio suggested by them being 9 out of 42 holdings, and separate suggestions for other rough percentages (using ~10% as an example, but they're easily adapted to other rough percentages, such as the current ~5% if that's the aim). Probably only about half of what I said will turn out be useful to TopOfDaMornin, which is acceptable to me when I'm only producing a few paragraphs. But I'm not going to put a lot of effort into producing detailed lists of shares I'd suggest topping up for each of those possibilities when it's clear that two thirds of that effort will turn out to be irrelevant!

In short, more detail is needed from TopOfDaMorning about how ITs fit into his or her HYP approach, to help me (and quite possibly others as well) to supply relevant help about this topping-up. Or of course to decide that I can't supply such help, if the envisaged use of ITs falls outside by fairly limited understanding of the various ways of using ITs. I.e. no promises that suitable help will be forthcoming from me if the extra detail is supplied - but it definitely won't be if the extra detail isn't supplied!

(*) And I'm afraid that Itsallaguess's post about a recent improvement to HYPTUSS doesn't really help with that, because the AIC sector allocations it uses are mainly geographical and investment-objective classifications rather than industry sectors - the underlying holdings of the "UK Equity Income", "Global Equity Income", "North America", "Asia Pacific Income" and "Global" ITs his example shows can still have all sorts of different distributions across industry sectors such as Mining, Banks, Pharmaceuticals, Retailers, etc, so only an analysis of the underlying holdings of the ITs concerned will give an accurate picture of the industry sector diversification. It is an improvement because some specialist ITs are in AIC sectors that clearly indicate the industry sector - for example, Greencoat UK Wind (UKW) is in the "Renewable Energy Infrastructure" AIC sector, which gives a very good idea what industry sector a UKW holding should be assigned to. But by and large, the AIC sectors don't do that, so it's only a small improvement for traditional HYP purposes.

Gengulphus

[TUK020]

On the subject of Investment Trust holdings being shown allocated to a sector of 'Equity Investment Instruments' in anyone's HYPTUSS tool, we've very recently implemented a change in that approach with the underlying HYPTUSS data, and have now adopted the AIC sector-allocations for all Investment Trusts currently listed in it. This improvement was primarily to help with exactly the type of problem being discussed above.

This improvement now means that anyone with IT holdings in their HYPTUSS would see a much-improved level of sector granularity for them, which not only feeds through to benefit the above issue, but also positively impacts other processes in the tool such as the 'Sector Weighting' functionality, as shown in the demo portfolio chart below -

Itsallaguess

I consider ITs to be part of my hyp (no capitals).
This enhancement is most welcome.
thank you

[Itsallaguess]

And I'm afraid that Itsallaguess's post about a recent improvement to HYPTUSS doesn't really help with that, because the AIC sector allocations it uses are mainly geographical and investment-objective classifications rather than industry sectors - the underlying holdings of the "UK Equity Income", "Global Equity Income", "North America", "Asia Pacific Income" and "Global" ITs his example shows can still have all sorts of different distributions across industry sectors such as Mining, Banks, Pharmaceuticals, Retailers, etc, so only an analysis of the underlying holdings of the ITs concerned will give an accurate picture of the industry sector diversification.

It is an improvement because some specialist ITs are in AIC sectors that clearly indicate the industry sector - for example, Greencoat UK Wind (UKW) is in the "Renewable Energy Infrastructure" AIC sector, which gives a very good idea what industry sector a UKW holding should be assigned to. But by and large, the AIC sectors don't do that, so it's only a small improvement for traditional HYP purposes.

Just for clarity, and as with any of the HYPTUSS tool sector and super-sector information, the data-fields are still user-definable as well, and as long as any user-defined Investment Trust sector definitions take the form of ''IT - xxxxxxx', then any different user-defined IT sectors will also continue to comply with the rest of the tool's functionality.

So far as the HYPTUSS tool is concerned, the difference between shares and Investment Trust sector definition is primarily around the lack of 'Forecast Yield' information for Investment Trusts, and so the way we control the delivery of 'Latest Yield' information for IT's is by checking the sector field, and taking 'Latest Yield' information where any sectors are categorised as 'Equity Investment Instruments', or have the format 'IT - xxxxxx', and so users are always able to define their IT sectors to show anything else they might prefer, so long as those definitions start with 'IT - ' in the sector fields..

The flexibility of enabling user-definition of sectors has always been a feature of the tool, but we've only recently improved the default IT-sector information to now show the AIC sectors instead of a single, blanket IT sector of 'Equity Investment Instruments', that's all...

Cheers,

Itsallaguess

[Gengulphus]

And I'm afraid that Itsallaguess's post about a recent improvement to HYPTUSS doesn't really help with that, because the AIC sector allocations it uses are mainly geographical and investment-objective classifications rather than industry sectors - the underlying holdings of the "UK Equity Income", "Global Equity Income", "North America", "Asia Pacific Income" and "Global" ITs his example shows can still have all sorts of different distributions across industry sectors such as Mining, Banks, Pharmaceuticals, Retailers, etc, so only an analysis of the underlying holdings of the ITs concerned will give an accurate picture of the industry sector diversification.

It is an improvement because some specialist ITs are in AIC sectors that clearly indicate the industry sector - for example, Greencoat UK Wind (UKW) is in the "Renewable Energy Infrastructure" AIC sector, which gives a very good idea what industry sector a UKW holding should be assigned to. But by and large, the AIC sectors don't do that, so it's only a small improvement for traditional HYP purposes.

Just for clarity, and as with any of the HYPTUSS tool sector and super-sector information, the data-fields are still user-definable as well, and as long as any user-defined Investment Trust sector definitions take the form of ''IT - xxxxxxx', then any different user-defined IT sectors will also continue to comply with the rest of the tool's functionality.

So far as the HYPTUSS tool is concerned, the difference between shares and Investment Trust sector definition is primarily around the lack of 'Forecast Yield' information for Investment Trusts, and so the way we control the delivery of 'Latest Yield' information for IT's is by checking the sector field, and taking 'Latest Yield' information where any sectors are categorised as 'Equity Investment Instruments', or have the format 'IT - xxxxxx', and so users are always able to define their IT sectors to show anything else they might prefer, so long as those definitions start with 'IT - ' in the sector fields..

The flexibility of enabling user-definition of sectors has always been a feature of the tool, but we've only recently improved the default IT-sector information to now show the AIC sectors instead of a single, blanket IT sector of 'Equity Investment Instruments', that's all...

So can I do the industry-sector analysis on a "UK Equity Income" IT, find out what percentages each industry sector represents of its underlying investments, define its sector to be e.g. "IT - 7% Pharmaceuticals, 6% MIning, 5% Banks, 5% Insurance, 4% Housebuilders, ..., 1% Information Technology", and have HYPTUSS automatically attribute those percentages of the holding's value to each of the sectors? Or preferably, since the weightings of the IT's underlying investments will vary over time, get HYPTUSS to automatically do the industry-sector analysis as well?

I very much doubt that I can expect those things of HYPTUSS... Which is not a criticism of the tool - it's just the fact that like all tools, it's only up to some jobs, and proper industry-sector analysis of portfolios that contain ITs (or other collective investments) that don't specialise in an industry sector isn't one of them (at least AFAIAA).

Gengulphus

[Mike88]

Is anyone buying or thinking of buying BT which has fallen so low it must be a possible takeover target? The share also has a current dividend yield of 9.5%.