CLLN

[John Miles]

According to Warren Buffet Ben Graham liked to do, among other things, something foolish each day.
I’ve just done so in spades by buying a couple of grand’s worth of Carillion.

PE 0.5, PBK 0.1.

What’s next?
A rights issue?
Then what?

Anyway, as a dedicated HYPer, I shall be holding them for ever and a day.

[Stephen Bland]

I point out that CLLN is in difficulties and has suspended dividends. As a result it is is currently a Hold in TDL, not a Buy, so I do not agree from an HYP viewpoint with your decision.

[Robert Synge]

My view is that the Dividend Letter’s policy of strategic ignorance is shown to be a major policy flaw.
The bottom line with Carillion is that we are all going to lose all of our our investment – either by the company being wound up or by being diluted to virtually zero by a massive government rights issue.
Many of us subscribe to the DL because we hope that, by doing so, the investment return should be better than if we do it ourselves but when the letter’s policy is one of complete indifference about a company’s financial statistics and no sell advice is ever given despite a company being clearly bankrupt, this is bordering on the negligent.
Carillion have been in trouble for some time and a responsible policy would have been to advise investors to sell when we still had a chance of getting out with some of our investment intact. As it is, by recommending to hold the share forever, we are losing 100% which could easily have been avoided.
Of course investors realise that sometimes share advice has to change when a company’s fundamentals change but to stick your head in the sand and claim that ignoring all news and update scenarios is wrong is simply poor advice.
I will keep subscribing to DL as I think the portfolio compilation and weighting is helpful but, from now on, I will be doing my own research before blindly following the writer’s advice.
No doubt Mr Bland will come on here with a strong rebuttal as I have noticed from previous posts that he does not take kindly to any perceived criticism but a policy of learning from one’s mistakes and improving the advice quality going forwards would surely be seen as helpful by all subscribers.

As to the subscriber who has just bought into Carillion, that is an extremely brave move and hard to see how it will pay off. Good luck in any event.
R.S.

[Stephen Bland]

I don’t object to criticism but as you might expect, if I disagree I’ll say so and explain why.

As for Carillion, I don’t propose repeating yet again the reasons for my treatment of the share, having stated them extensively both on this forum and in TDL previously. I hold it too.

Incidentally, you are incorrect to say that my never sell advice arises from my concept of Strategic Ignorance. SI refers to ignoring long term opinion of a share, a sector or the economy in general when selecting a new holding. I gave in my earlier explanations on CLLN the reason for never selling, which is not due to SI.

Clearly TDL is only advisory and I’d guess that many readers add their own judgements to mine as you say and I have no quarrel with that at all. Whether that leads their portfolios over time to perform better than mine, as measured by the pattern of long term total income, is something only they will know.

[John Miles]

Hi Robert, Hi Stephen, Hi Everybody.

In my view Stephen is 100% right: he doesn’t do selling because he believes, almost certainly correctly, that on balance it pays to hang on to apparent disasters rather than sell them.
If you know better, and it really works for you, that’s fine, as I’m sure Stephen would agree; but you wouldn’t
be a HYPer any more.

As f0r my “brave” buying into CLLN. I can only say that now and again I can’t help doing something frivoloous.

What did Shakespeare once say?

Home life is heaven, and orgies are vile.
But you need an orgy once in a while.

One can’t be a complete angel all the time.
I can’t anyway

[Christopher Evans]

See my thread on “Stop loss” for Stephens further views, maybe this morning I will be reassessing its relevance, but overall my HYP is up 20% on capital over two years regardless of dividends so I cannot really doubt Stephens responses, not that I am here for capital growth.

[Phil Mandelovics]

good morning
so that’s it? all is lost?
when you advised on the share did you take into account that it was the most shorted stock in the ftse?

[Stephen Bland]

Yes, all is lost on CLLN. No I did not take account of the short position but because of their financial difficulties I moved it to Hold some time ago. I don’t do Sells (except in very rare technical circumstances not applicable here) as you probably are aware, for reasons I’ve mentioned previously and which I’ll reiterate in this week’s TDL which will be about the CLLN failure.

If you think short term trading opinion, long or short, has any place in the HYP strategy, it doesn’t. Most traders lose money so their view is of no consequence in my opinion. And I’ll say further that even if I were to take account of a strong majority view on a share, I’d probably go the opposite way provided my analysis supported this. Long experience tells me that the majority is all too frequently, but not always, wrong. One case where they were right does not disprove this.

[Nigel Bell]

Surely the main point about Carillion is that it is but one stock in a portfolio of high yielding shares. The nature of high yielding shares is that a minority may end up like Carillion but that others in the portfolio will make up for the always possible disasters like Carillion. I don’t intend to change my approach which is to buy and hold for eternity and benefit from the natural yield that the portfolio generates. I am more aggrieved that the directors at Carillion were in effect being economic with the truth in their releases to the Stock Exchange. There were plenty of rumours and the stock was being shorted back in 2016 so those who wanted to get out could have. I wonder also how the auditors will deal with the questions they need to answer. Carillion has gone but that’s the nature of investing – some will go bad and my advice is to move on and enjoy the benefits of the other high yielders.

[Juliet Hunt]

Juliet Hunt

We should all know the strategy well. Nobody likes to see a share disappear but it is what it is and you either agree with Stephen’s portfolio rules or you don’t. It has worked extremely well over the years and calling foul now over one share is not, in my opinion respectful to Mr.Bland. Dissenters have choices and if they have followed the strategy they should all be very happy with his recommendations so far. Many thanks Stephen

[Martin Silman]

Think most of my thoughts have been stated above, but just to add to the consensus – I lost £6,500 last year from my ‘Dividend Letter’ bucket due to CLLN going under, yet that bucket still grew 6% overall last year. Additionally, I have another bucket where I actively buy and sell small companies and many times I have set a stop loss, often at 30% below current value, automatically sold when the price dropped and then found myself buying back in at a much higher price 2-3 months later – so most of the time, staying invested even in that marketplace is the better strategy. When you are restricting yourself to Dividend Letter selections it is even more true, though I tend to occasionally replace selections from earlier HYP’s with the current selection for that industry if and when they drop to HLD and prospects don’t look good in the medium term (not that you can tell but…)

So keep up the good work Stephen.

[Stephen Bland]

Thanks for the positive comments. I reiterate as mentioned in the latest TDL and on previous occasions that it is extremely rare for a large company to go bust and this is principally the reason I stick to such shares for HYP selections. But there are no guarantees, shares and their dividends are always a risk investment. The defence, which forms the foundation of HYP construction, is a widely diversified portfolio so as to reduce the risks specific to any particular industry or share. Risk remains of course, that cannot be eliminated from an equity investment but it can be ameliorated in this way.

And the ultimate test of the success of the approach is a growing portfolio income over the long term, not what happens to each individual share.

[John Miles]

A CLLN experience doesn’t half sort the men from the boys.

[Andrew Franks]

The reason that I subscribe is because of your unbending attitude/comitment towards a proven strategy. Agree or disagree, like or dislike, the strategy is the strategy and overall the framework of the thing is simple but very effective.

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