Good Riddance Dogs 2017, Hello Dogs 2018

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Just my luck that as I reach the twelve month mark for my experimental Dogs of the FTSE portfolio, things go all pear-shaped in the markets!

Whilst I have largely avoided reading all about the hysteria, it was difficult to ignore the headlines describing the small downturn with words such as ‘TURMOIL’, ‘BLOODBATH’ and ‘CARNAGE’!

I didn’t worry about my Future Fund – I’ve no idea how much it’s dropped by as I’ll be running my usual numbers at the end of the month, but I did think about how it was going to affect my little Dogs portfolio.

Capita (CPI) in particular suffered in a spectacular fashion – I know it hasn’t been in the FTSE 100 for a while but they were one of the top yield stocks when I started the portfolio so I was committed to purchase and hold them for the year. Oh dear, indeed!

As a reminder, here’s the Dogs of the FTSE strategy:

  1. Choose the ten FTSE 100 shares with the highest yield (subject to my criteria*)
  2. Invest equal amounts in all ten shares
  3. Hold for a year (give or take a week)
  4. At the end of the year, sell the ones no longer in the top ten, replace with new shares with highest yield
  5. Repeat from step 3

[*criteria being that shares already in my portfolio are not included, nor any where a dividend cut has been announced]

Here’s how the 2017 portfolio finished:

Not pretty – Capita wiped out my total gains all by itself, yet back in July, it was showing a 25% gain, not including dividend paid. Gosh, I probably doomed the stock by saying that it was ‘showing its pedigree’ in that post – little did I know how the mighty would fall!

So, including dividends, only a paltry 1% gain for the entire portfolio! OUCH!

However, over this same period, the FTSE 100 Total Return was only 0.81% so despite the Dogs being a disappointing let down, they marginally did better, haha! Without dividends though, they seriously under-performed with a 4.35% loss.

What’s Next?

What’s next is the 2018 portfolio!

Oh yes, I’m going to put myself through this again in the name of err, ‘financial science’ and hope there won’t be Turmoil, Carnage or Bloodbaths this time round, nor any spectacular Capita-style demises!

So, in accordance with the strategy:

Dogs Set Free (Sold):

  • AstraZeneca plc (AZN)
  • Capita Plc (CPI)
  • HSBC plc (HSBA)
  • Intu Properties plc (INTU)
  • Royal Mail plc (RMG)
  • Standard Life Aberdeen plc (SLA)

Total received from sales = £1298.38

Total Dividends paid out = £76.96

Profit/Loss from original investment = -£92.45 or -6.3% – ouch!

It was not easy at all pushing the ‘sell’ button for some of those but I am committed to the strategy.

Dogs Rounded Up (Bought): 

  • BT Group plc (BT.A)
  • Imperial Brands Group (IMB)
  • Evraz plc (EVR)
  • National Grid (NG.)
  • United Utilities Group Plc (UU.)
  • Rio Tinto plc (RIO)

Wrong time to sell, right time to buy? Who knows!? I’m not timing the market.

So here’s how the Dogs of the FTSE Portfolio 2018 starting lineup looks as at 12th Feb 2018:

Best of breed or mangy mutts?

Hmmm…for some reason I don’t feel quite as confident as I did this time last year, but we shall see in 12 months time and as before, I’ll be doing quarterly updates.

Lessons Learned?

I’m not sure I’ve learned anything from running this experiment after just one year, though I must say that I thought the portfolio was going to do better. I guess if I hadn’t been following the strategy, I’m not sure I would have sold some of those stocks.

Let’s see how it goes after a few more experiments.

24 thoughts on “Good Riddance Dogs 2017, Hello Dogs 2018”

  2. That’s an interesting strategy you have there.

    I haven’t done any picking of individual stocks but I have been looking at National Grid. It’s appears to be at a good price and a number of the ratios (dividend payout, current ratio, price/earnings) look good too and considering it basically has a monopoly in England & Wales I’m failing to see where it could go wrong.

    Good luck with it!

    • Thanks HTSC
      I don’t want to be too optimistic with any of them in case one of them (or more) turns out to be a Capita or even worse, a Carillion!

    • Ive been looking at NG as well – its PE, dividend and defensive qualities are highly attractive. However, its debt has put me off, especially with rising interest rates that cannot be good. I know John Kingham (UK Value investor) has written about NG’s debt and why it may not matter as much as with other companies. Still not convinced though.

  3. When I lose a bit of money like this, I found it helped to reframe as having paid for learning/training. If I can figure out lessons learned, and apply them – then even a hefty loss can be reframed as money well spent.

    Good luck with 2018’s pooches.

  4. You got balls for sure! Good luck and lets see what happens next year! Last few weeks have not been pretty but in it for the long term so not panicking!!

  6. Hi Weenie,

    Whilst the timing may feel bad with the pear-shaped dive, just think of the positive – this hits everything 🙂

    I do run my numbers every week (desperation?!) so I saw the drop hit – not nice to see but I know that this means either I will buy more for the same money, or it will go back up!

    Fascnating to see the difference between them all, as you say Capita was a big ouch, but some others the also have a fair old drop…

    Great to see you are doing it again in 2018, will be fascinating to see how this pans out over the years (assuming you keep doing it!)

    Interesting to see this years stocks…I only hold 2 of them (AZN and SSE) – I wait with interest to see how this pans out!

    Cheers,
    FiL

    • When I started investing, I was checking my numbers pretty much every day, haha – not great for the stress on my heart! These days, I check just once or twice a month, just before I do my month end update. But you have the right attitude, when the prices are low, you’re buying more with the same money!

      Yes, interesting that it wasn’t just Capita which underperformed but who could have predicted which ones would go up or down? I hope to be running these portfolios so I have at least 3 years’ worth, perhaps 5 years, depending on my nerves haha! Or I may just continue to keep this as a fun part of my portfolio.

      Good luck with your stocks, FiL!

  8. Two pieces of conventional equity investment wisdom:

    £1000 is a minimum investment, and if you are investing in shares your time horizon needs to be 5 years or more.

    If you are buying £250 worth of shares with a typical commission of £12.50 (which is what I pay) then your investment needs to grow by 5.5% just to cover trading costs and stamp duty. Optimistic in one year.

    Forcing yourself to sell after just one year increases the chance of locking in ‘paper’ losses. It is all about time in the market, not timing the market. As Warren Buffet said, ‘our preferred holding period is forever’.

    My personal strategy is long term buy and hold of high yield blue chips. All dividends reinvested. I almost never sell a share and I am in the fortunate position of being able to implement a £2000 minimum purchase. It takes a little discipline but this naïve approach has beaten the market every year since I adopted it.

    • Hi Philip

      Thanks for stopping by.

      My main investment strategy is buy and hold, with dividends reinvested – this is just a small experimental part of my portfolio, following the Dogs of the FTSE strategy.

      The commission I pay for each purchase is only £1.50 as I make use of my platform’s regular purchase facility. The usual fee is £9.95 and if I had to pay that for each purchase, then I wouldn’t buy in small amounts of £250 – in fact, I would probably be unlikely to run the experiment in the first place as I had limited funds to use for this experiment. Of course, I could have used ‘notional funds’ but I’m sure most would agree that it’s more fun (and scary) using real cash! 🙂

      Agree that selling after one year can lock in paper losses but I’m just blindly following the strategy as something different to what I’m doing with the rest of my portfolio.

  9. Oh wow! Bad timing indeed! Maybe the capita crash was caused by everyone selling out of their yearly dogs portfolios and you were just a bit late 🙂 ?! That sounded silly at first but there could actually be something in it…?

    Maybe it would be better to run the experiment from now until to December to get ahead of any potential selling crowd this year?
    Glad you are rounding up the dogs for another year… Finding it very interesting so far.

    Cheers and GL 🙂

    • Cheers TFS.
      Hear what you’re saying but what if there’s a crowd selling in December or January this time round? I think I was just unlucky so perhaps I will be luckier this year! There’s so much randomness and luck I think that can change everything.

    • Haha, thanks RMIL!

      Fearless or Foolish, though? 🙂

      That the money used to invest in this portfolio was cash I wasn’t expecting makes it somewhat easier to risk it with this experiment – I’m not sure I would use my hard earned salary on something like this!

      The new dogs are looking good so far but I don’t want to be too optimistic!

  11. I like experiments like this – kudos for putting your money where your mouth is.

    Have you considered a stop loss of say 25% to limit your downside? In a bear market, when correlations go to 1, you have a pre-planned exit to avoid a much deeper loss.

    Thank you for sharing

    • Thanks Craig – I had originally considered just doing it as a virtual experiment but knew that if there wasn’t real money involved, I’d quickly lose interest in updating it!

      I haven’t considered a stop loss although have been tempted to sell when there was a large profit. However, I’m committed to the strategy which is to hold the stocks for a year, so have to swallow the losses (if any).

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