Tuesday 28 May 2013

Portfolio Sale: Homeserve (LSE:HSV)

Janus -
two heads are better than one?

Buy and hold?

That's what I claim I do - but here I am selling the Homeserve shares I bought only last month: I said at the time that I was investing for the 'medium term'.

So, am I a 'Value Investor' in 'Income Investor' clothing? An investing Janus?

Basically, Homeserve seems to have fixed its own figurative 'leak' in reputation. The shares have leapt up 30% since I bought, triggering my 'sell' signals:
  • capital gain of over 5 years-worth of current income
  • current/forecast yield (around 4.4%) well under the portfolio average

As I mentioned previously, there are a number of issues around this company (including an as-yet-unspecified potential FCA fine) that encourage me to grab the money and run.

This share buy and sell illustrates an interesting point about buying high-yield dividend shares. Generally speaking, dividend yields are high because the share price is depressed due to risks anticipated by the market - and the higher the yield, usually the higher the risk.

This means that if you can understand the risks that are spooking the market, you can make your own decision about how 'real' these risks might be - Mr Market is sometime a manic-depressive. Usually you do not have all the insider information on the company, so be aware that it is inevitably a bit of a guess.

In other words, the high yield is also an indicator of potential recovery - both an 'income' and a 'value' share. A two-faced share that can pay dividends in more than one sense.

[Sale price: £2.637]

I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

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