UK Stockmarket 2009 and beyond

A_Flock_Of_Sheep

It all seems to have gone a bit naff.

Just look at EDIN. A paltry 8% odd climb in a year yet it was forging ahead.

gadgetmind

EDIN took a big knock when the manager jumped ship. That was when I decided to buy!

[Deleted User]

gosh this thread is still alive, good

just popping in to say that I have repositioned the portfolio to include 48% defensives, 32% sensitive and 17% cyclical and now only hold a minute amount of cash. The defensives were in place all along and I have been approximately 50% cash for a few weeks after wrapping up profits. I have changed tack a bit this time and have gone for uk companies and mostly from the ftse 250 as they are showing most value. I now have 30 stocks and one bank perp, having sold all the other perps and prefs ages ago, this perp has increased capital by 24% and gives an ongoing yield of 12%, it is a biggie bank but I bought when confidence was shattered years ago. 29 of the stocks have a divi, average about 4% and none lower than 2.3%, so this portfolio will be inflation beating. I don`t normally have so many stocks but have put a lot less k into each one, depending on the chart TA. Took me all afternoon yesterday and am happy to not be exposed worldwide due to uncertainties

bowlhead99

Just curious, what's the biggie bank with the 12% yield (I assume you mean that's the yield on its current price rather than on the price you bought at when it was ~20% cheaper)?

I've been holding on to quite a few of my prefs which have performed well in recent years (e.g. Lloyds, Nat West, some Co-op bank ones bought during their crisis which have now converted into co-op group debt, and a few other non-bank ones), and haven't quite decided when to jump off.

But LLPC and NWBD are round about 135p at the moment for 9p a year of income (LLPC was over 140 just recently), so I'm getting less than 7% on them now and I don't expect them to keep shooting higher and higher, they've somewhat plateaued. Obviously the yield is better than sitting in cash but if interest rates are going up I might be taking a hit on the capital side so I do plan to trim these back.

It just seems like there is not too much in the way of bargains out there in shares or bonds and with FTSE in the high 6000s it's difficult to drop something that's paying a reasonable coupon to swing that money into equities. So my prefs are more 'hold and wait and see what the market might do next' money (Lloyds is my biggest holding of the ones mentioned)

[Deleted User]

bh99, that is the yield on the price I paid for them. I bought all of them when the banks collapsed, you have to be contrarian sometimes. I offloaded all the others last year. I am not looking for bargains in shares, I am looking for value and good TA also divi cover etc and as I manage my husbands sipp, which I vested for him and he is retired now, I tend to be a bit on the cautious side so have a good spread of stocks. I used to have coop prefs, you know what happened there but it was just like losing on a share, dump and move on. Sipp up 70% since I took it on in 2006/7 and no ifa fees. I don`t tend to follow the crowd though

Masomnia

I bought LLPC at just above par, still got them and done very nicely between capital growth and the dividend. I'm not planning on selling any time soon, if the price falls as I'm sure it will then my reinvested dividends will just be buying more. In the absence of anything better to do with the income I'm happy doing that.

Other than that I've sold a lot of stuff, as I need the money. It was a good time to take some profits though I think. Lloyds I'd paid something around 40p on average so made a healthy profit on those last month. Still got EMED... Written that off really. Centamin doing ok. Little punt on Barclays (moment of madness I think) not doing great, but I'm happy to hold that.

Overall everything feels a bit 'toppy', so I'm not too bothered about having to see stuff.

bowlhead99

kittie wrote: »

this perp has increased capital by 24% and gives an ongoing yield of 12%, it is a biggie bank but I bought when confidence was shattered years ago.

kittie wrote: »

bh99, that is the yield on the price I paid for them. I bought all of them when the banks collapsed, you have to be contrarian sometimes.

There's often bargains to be had if you're happy to go against the flow and be contrarian; a lot of bank prefs and perps have had a good run and while they haven't done so well as if I'd bought and held ordinary equity shares in Lloyds from their low point, they had substantially lower risks.

The thing is though, particularly if you're going to be contrarian, you have to be careful not to rest on your successes and hold things for sentimental reasons.

For example, when you first mentioned your perp that delivered a great capital return and a great ongoing yield, it sounded like a dream holding - something with a high yield can often be a great value play as your capital appreciates even further when the share price corrects upwards. But the reality is, you can't have your cake and eat it - it was a double digit yield but if you've had a 24% gain since then, it isn't any more: you're not getting that on an ongoing basis if you consider how much cash they're worth today.

I bought my first Lloyds prefs a good way below par, when dividends were suspended, then some more around par in late 2012, and some more at almost 20% over par when the yield was 'only' about 8%. The capital return on all of them has been strong and the yield on the first ones sounds fantastic if I were to think of how good it is to get 9.25p a year off something that only cost 80p or so.

But that kind of thinking is dangerous - the reality is that from here, I can have 4.625p every May and November and some unknown amount of capital in the future, or I could turn it back to cash and just have 135p tomorrow. The 80p I paid shouldn't be in my consciousness any more because the tasty yield I initially got is not my ongoing yield from here. From here, it's 9.25p a year or 135p cash, and 9.25p on 135p is not a double digit return. And the 55p capital appreciation I had on 80p, of almost 70%, can't possibly happen from here.

So, looking at prospects from here, there's no big percentage capital gain to hang around for, and I'm not earning a monster yield. The 9p won't feel so smart when inflation means you cant buy anything good with 9p any more, and when rising interest rates mean that you can get 5%+ risk free - so nobody will want to give me as much as 135p for my risky income stream. So I need to think very carefully about whether I keep them.

For right now, I'm OK with them, but if I keep thinking about not wanting to give up 11 or 12% yield, I'll make the wrong decisions. I have to think of it being around 7% yield with no inflation protection for the capital bit, and actively compare that with whatever else is floating around the market for me to grab instead.

gadgetmind

I'm actually surprised that I'm still holding my perpetuals as I planned to dump them well before now. (Well, I say "my" but it's wife+daughter who hold the NWBD and LLPC, and plenty of them!)

bowlhead99

Yeah, me too. Think we mentioned on another thread it's hard to find somewhere compelling to move them to. But I was thinking about them a bit more just now.

If I look at LLPC paying 9.25p on 135p, the yield is about 6.85%. Actually a little better than that because it pays twice a year rather than all at the end, and we're already a couple of months into the year, but let's just call it 6.85% for simplicity.

Let's say that over the next year, base interest rates go up half a percent, away from this record breaking lengthy all time low. Maybe a quarter in Jan and a quarter in July, if the recovery looks like it can sustain that, as some have mooted.

Logically (again without going overboard on exact maths), you would assume that if Lloyds s business is basically unchanged and not any more risky or any less risky than it is right now, then if risk free assets start paying half a percent more, than you would want Lloyds paper to pay half a percent more of yield.

So half a percent on top of the current 6.85% is 7.35% yield demanded by the market. If the 9.25p cash is a 7.35 return, the price must drop to 126p and I lose 9p on the capital in the course of collecting 9p income over the year.

[Hmm, somehow I accidentally edited the post and lost a chunk of related discussion/ musings. Ah well, can't be bothered typing it up on my phone again!]

[Deleted User]

bh99, this granny doesn`t need teaching to suck eggs btw I know exactly what I am doing and yes I do knit but I am also knowledgeable and comfortable with TA, having learnt from some of the great ones. I never guess or gamble with our holdings.

One of my mid cap ftse 250 companies has done well today, up over 17%, bought yesterday pm. Lots of value lurking in 250 companies at the moment. All losses through spread and stamp duties recovered today and in profit by a few 00, happy after dealing 22 stocks yesterday pm. FTSE 100 consolidating well and on target to 6900

over and out now and back to growing veg and knitting, I just glance at my charts from now when I update my charting package

edit: forgot to say it was HWDN