Slotting shares in utilities-services provider Telecom Plus (TEP) into the Bearbull Income Portfolio (see last week's Bearbull) triggers this dilemma, prompting two related questions: are shares in Telecom Plus wildly overrated, and why does the Bearbull fund get such a low rating?
Let's focus on the first question. Recall that, superficially at least, a holding in Telecom Plus offers good things for the income fund. At their current 989p, the shares come with a 4.7 per cent yield on 2015-16's promised 46p payout. Simultaneously, a combination of the high volatility in Telecom Plus's share price, the above-average monthly gain in the price and its low correlation with price movements in the Bearbull income fund make Telecom Plus shares a useful addition to the portfolio. These benefits aren't in question - though that doesn't mean they are certain to materialise - but it may be that I'm paying too high a price for them. Put bluntly, it's difficult to find value in the shares that's remotely close to the current share price.