Hypster's HYP Annual Review

[Hypster]

I’ve not conducted an annual review before but in preparing this one I decided to look back to the very start of the portfolio so that I had something to compare against. It's quite a lengthy post so I'll break it up into each period.

[Hypster]

I found HYP via PYAD’s articles on The Motley Fool many years ago. The concept really interested me and I enjoyed Stephen’s writing style. At that time I didn’t have any money to invest because I was trying to get on the housing ladder but I do remember working down the FTSE 100 by yield and seeing what stood out. When the banking crisis happened in 2008/9 it triggered a memory about those HYP articles because banks featured quite heavily in that cursory review I’d done before. By 2012 I was lurking on the TMF HYP board and in 2013, without really thinking about setting up a HYP I decided my next share in my general investment portfolio would be selected on HYP criteria. I bought SSE towards the end of the year, too late to receive any dividends for 2013. I decided to track the performance of this share separately from my other investments. I unitised from the start and the baseline figures for this one-share portfolio looked like this on 31 December 2013.

[Hypster]

In 2014 I bought HSBC and decided I might as well lump them with SSE in my separate portfolio to create a fledgling HYP. With that decision made, I started to trickle funds to this embryonic portfolio. I saw a 16.1 % increase in unit price in 2014, which compared favourably against RPI. Of course, there are no income performance for 2014 because I’d not received any income in 2013 to allow a comparison to be made.

[Hypster]

I’d accumulated enough cash to buy Imperial Brands in 2015, and I continued to add one share at a time when funds built up. By the end of the year I’d also bought Royal Dutch Shell and BHP Billiton to give me a five-share HYP. At the end of the year, my calculations showed that my income per unit had risen above RPI and I was thrilled!

[Hypster]

In 2016 I suffered my first ‘cutter’: BHP Billiton. Given that my portfolio was quite concentrated I wondered how dramatic the income figures would reflect this. I added two more shares during the year, Legal & General and Sky, to take the total to seven. In the end the BLT cut wasn’t as bad as I feared because the other shares managed to keep the income slightly up compared to the previous year, albeit not as high as RPI.

[Hypster]

In 2017 I decided to stop messing around with my little HYP ‘experiment’ and decided to get fully behind the concept. I stopped investing in my established mxed-bag portfolio and directed all funds to the HYP. I significantly increased the cash flowing into the HYP every month, and with a maturing cash ISA I managed to drop a large lump sum into the HYP just before the end of the 2016/17 tax year. I set about buying shares to get me to the critical mass of 15 and actually ended up with 19 at one point. It was the most dramatic year of my HYP so far. The dividends from Sky dried up because of the takeover talks. Provident Financial issued a profit warning or three and ultimately was a complete and utter disaster! I sold PFG in a panic - down 20% on that particular day only to end the day (just) 10% down. My worst ever capital loss on a share. However, turning this into a positive I now have the opportunity to conduct a study in tinkering. I will make a note of what the rump of cash eventually buys and I plan to compare how the replacement share compares against PFG over time. In the end, despite the horrible cash loss, on percentage terms the portfolio didn’t suffer too badly.



My aim for the portfolio is for a rising, inflation-beating income and on that aspect it failed. I was hampered by the loss of dividends from both Provident Financial Group and Sky.

Notes:
The dividend per unit figure is calculated by dividing each dividend payment by the number of units held on the payment day, and these individual figures are added for the complete year. These exclude special dividends.

Here’s how the portfolio looks as we head into 2018. You can find ongoing maintenance posts here: https://www.lemonfool.co.uk/viewtopic.php?t=4443



and by sector…



Forecast yield is 5%

I’ve learned so much from posters on The Lemon Fool over the year, thank you for sharing your knowledge and experience.

I wish you all a prosperous 2018.

[ADrunkenMarcus]

Many thanks for a detailed review, interesting stuff.

Best wishes

Mark.

[Hypster]

Finally got round to looking at the performance numbers for last year. Income was up 26% at 6.3p per unit. This compared favourably against RPI, which rose 2.6%. Capital was down 6.6% (with the FTSE down 14.3%).

Year | Income per Unit | Income Change
2014 |             4.7 |              
2015 |             5.0 |          5.5%
2016 |             5.1 |          2.0%
2017 |             5.0 |         -2.0%
2018 |             6.3 |         26.0%

One new share was bought, Playtech from the FTSE 250, no shares were sold, and fourteen were topped up. Sky was taken over: the proceeds were scattered between Persimmon (40%), Playtech (40%), and Royal Dutch Shell (20%). Here's what the portfolio looks like today sorted by value.



And by sector...

Sector                              | Weighting
Gas, Water, and Multiutilities      |     11.0%
Travel & Leisure                    |     10.2%
General Retailers                   |      8.2%
Household Goods & Home Construction |      8.0%
Fixed Line Telecommunications       |      7.0%
Life Insurance                      |      6.1%
Electricity                         |      6.1%
Real Estate Investment Trusts       |      5.2%
Media                               |      5.1%
Oil & Gas Producers                 |      5.1%
Tobacco                             |      5.1%
Mobile Telecommunications           |      4.8%
Pharmaceuticals and Biotechnology   |      4.5%
Banks                               |      4.4%
Mining                              |      4.2%
Aerospace and Defence               |      3.4%

September was my best month for income receipts. It was also the month when my income per unit figure overtook last years total (21st September to be precise). I shall have to think of a name for this day: Hypster’s Harvest Festival perhaps? A movable feast, with or without Morris dancers.

Dividend Distribution

By Half Year |     % | By Quarter |     % | By Month  |     %
H1           | 38.8% | Q1         | 16.8% | January   |  3.4%
H2           | 61.2% | Q2         | 22.0% | February  |  4.0%
             |       | Q3         | 46.6% | March     |  9.4%
             |       | Q4         | 14.6% | April     | 10.6%
             |       |            |       | May       |  2.9%
             |       |            |       | June      |  8.5%
             |       |            |       | July      |  5.0%
             |       |            |       | August    | 14.2%
             |       |            |       | September | 27.4%
             |       |            |       | October   |  2.3%
             |       |            |       | November  |  3.5%
             |       |            |       | December  |  8.8%

All the best,
Hypster

[tjh290633]

Something odd there. Persimmon is over 13% by weight, yet it's sector is only 8%.

Were it that weight I would be trimming it back to 10% or less. I started trimming overweight holdings back in 1997, when I had 18 holdings and Lloyds TSB and Zeneca were both well over 10% weight. Prudential were also about 10%, so I trimmed all three back below the 10% level. Since then, as the number of holdings grew, I set a limit on holding value. Initially twice the median weight then, as the number of holdings rose above 30 and their monetary value increased, I reduced the limit to 1.5 times the median. I think that with 20 holdings a limit of 10% of portfolio value is a reasonable level.

TJH

[monabri]

Something odd there. Persimmon is over 13% by weight, yet it's sector is only 8%.

Were it that weight I would be trimming it back to 10% or less. I started trimming overweight holdings back in 1997, when I had 18 holdings and Lloyds TSB and Zeneca were both well over 10% weight. Prudential were also about 10%, so I trimmed all three back below the 10% level. Since then, as the number of holdings grew, I set a limit on holding value. Initially twice the median weight then, as the number of holdings rose above 30 and their monetary value increased, I reduced the limit to 1.5 times the median. I think that with 20 holdings a limit of 10% of portfolio value is a reasonable level.

TJH

PSN is reported at 8.1% by value (13% income ) in the first table.

[tjh290633]

Something odd there. Persimmon is over 13% by weight, yet it's sector is only 8%.

Were it that weight I would be trimming it back to 10% or less. I started trimming overweight holdings back in 1997, when I had 18 holdings and Lloyds TSB and Zeneca were both well over 10% weight. Prudential were also about 10%, so I trimmed all three back below the 10% level. Since then, as the number of holdings grew, I set a limit on holding value. Initially twice the median weight then, as the number of holdings rose above 30 and their monetary value increased, I reduced the limit to 1.5 times the median. I think that with 20 holdings a limit of 10% of portfolio value is a reasonable level.

TJH

PSN is reported at 8.1% by value (13% income ) in the first table.

Apologies, I got the column headers mixed up. I just looked at weighting in the second row.

A reminder to ensure that they are legible when I post.

TJH

[TUK020]

PSN is reported at 8.1% by value (13% income ) in the first table.

13% income from one share in the "too good to be true yield level" is still scary stuff.

I hold PSN at about 1.2x my median by value. As it is about 1.9x median income, it is on the veto list for new funds.
If the s.p. were to recover another 20% it would definitely get top sliced.