Reply To: Carillion

Moderator

It’s your call if you wish to sell any share. TDL is only advisory.

I advise on what I believe is the optimum overall very long term strategy which on balance is never to sell voluntarily. It’s a very weak and innumerate argument to select examples which appear to support your view whilst ignoring those which contradict it. This is the kind of loose talk one sees on share forums all the time and is an example of the psych. weakness known as confirmation bias. You mention two shares that have done badly by holding. I can show you shares that have done very well after having suffered extremely weak periods but similarly, that would be a poor argument and reflect confirmation bias on my part.

The real test is not therefore you or I selecting isolated examples which appear to prove what we want, it’s whether on balance and over a long period, holding beats selling for the whole High Yield Portfolio. I think it does and hence my advice. I can’t actually prove it numerically, but having followed markets for many decades, and having been in a position to observe large numbers of private investors who habitually get timing and share selection wrong and lose money, I believe I’m right. I’ve seen investors with big cap portfolios fifty and more years old, who never touch them and just let market trading like bids and divestments etc. effect any changes. These investors in general, over long periods, trash the traders, dabblers and tinkerers who think they actually know something about shares. Ignorance is bliss and Strategic Ignorance is double bliss.

I accept that never selling will result in some shares that may not fully recover dividends and capital, even over a long time, and that I’ll call it wrong on occasion. But my point is that eternity holding also captures those that do recover well and you don’t know in advance which ones will and which won’t. My view is that the value recovered by the latter will more than compensate for the value lost by the former over time. And don’t tell me that it is somehow clear in advance which shares will go on to put in a great recovery and which will not. Nobody knows and those that think they know, know the least.

As for “shorters” in the case of Carillion, I’m not interested in them, or longers either. I’m not interested generally in what the markets are saying at all about my selections and the day I become interested is probably the day I’d have to give up. One of the fundamental vindications of my HYP strategy is that shares are purchased in many cases when the market is against them, the price is depressed and the yields forced up to HYP levels. I know for certain that going against the market in my structured and calculated way works over time. That doesn’t mean that every share does well on dividends and capital, it means that the portfolio overall is very likely to do so, though there are never any guarantees because equities involve risk. A diversified portfolio approach like HYPs is designed that way so as to lower risk. But it goes with portfolio territory that some shares will do much better than others.

However, listening to “the market”, dilettante bulletin board gossip, press or broker comment and the rest of the torrent of guff out there is definitely not the way to go when deciding on initial share selection or subsequent direction. The success I’ve achieved with TDL over its nine year plus life to date, has been achieved because I studiously don’t follow anybody else.

So I’m not about to change a view built up over many decades and which has worked for a lot of people, just because of a couple of weak shares.