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Lemley Yarling Management Co
15624 Lemley Drive
Soldiers Grove, Wi 54655
Bud: 312-925-5248

Comments on activity in client accounts

28 April 2018

During the week we bought Michael's Stores (granddaughter's recommendation) and added to AT&T when it dropped to a 6% yield on analysts' disappointment with earnings and revenues. We also added to GE in some accounts.

The Trumpster soap opera/reality show continues as do 1% up and down days courtesy of the big boys and girls computer play.

The Trumpster is the Trumpster but the Korean Pax hope is one thing he can/will take credit for. We are willing to give him that feather- if peace occurs- although the President of South Korea Moon deserves the lions share.

Hope springs eternal and the circuses and reality presidency continues. As long as earnings are good the markets are safe. Ten Year Treasuries traded up thru the dreaded 3% level without calamity. Shall we try for 4%?

Michael's stores

https://finance.yahoo.com/quote/MIK/profile?p=MIK

General Mills

https://finance.yahoo.com/news/barrons-general-mills-stock-may-203509716.html

Under Armour

https://www.cnbc.com/2018/04/23/under-armour-upgraded-by-deutsche-bank-amid-rapidly-growing-overseas-business.html?__source=yahoo%7Cfinance%7Cheadline%7Cstory%7C&par=yahoo&yptr=yahoo

Newell Cos

https://www.wsj.com/articles/newell-brands-reaches-deal-with-investor-to-avoid-proxy-battle-1524489776?mod=yahoo_hs&yptr=yahoo

GE

https://www.barrons.com/articles/ge-a-blessing-and-a-curse-1524493825?mod=yahoobarrons&ru=yahoo&yptr=yahoo

And

https://finance.yahoo.com/news/ge-apos-q1-performance-proves-153500048.html

Eddie Lampert is attempting to complete the rape and dismantling of Sears. He holds a bunch of the debt (https://www.thestreet.com/story/14463492/1/how-eddie-lampert-can-come-out-ahead-no-matter-where-sears-lands.html) so what he is paying will eventually come back to him.

Moreover the whole company's equity is priced at $400 million of which Lampert owns 38% and 2 other hedge funds own 50%. Yet he wants to pay $500 million for part of the company. Inquiring minds smell something fishy.

http://www.businessinsider.com/sears-ceo-eddie-lampert-wants-to-buy-kenmore-and-real-estate-assets-2018-4

Shareholders and management get rich while workers suffer—Amazon

The American people are financing Amazon's pursuit of an e-commerce monopoly every step of the way: first, with tax breaks, subsidies, and infrastructure improvements meant to lure fulfillment centers into town, and later with federal transfers to pay for warehouse workers' food. And soon, when the company begins accepting SNAP dollars to purchase its goods, a third transfer of public wealth to private hands will become a part of the company's business model.

https://theintercept.com/2018/04/19/amazon-snap-subsidies-warehousing-wages/

20 April 2018

Markets are stretched and so we raised some cash by eliminating Devon, our last oil position, as West Texas Crude approached $70 a barrel. We are about even for our oil trading over the last year and well ahead for the 3 year period.

We also sold Juniper for a scratch. We purchased it recently for a trade.

We eliminated Macy's for a scratch profit if the dividend we earned while holding is included and we are well ahead in trading M this year.

Last Friday, after our post, we sold Merck for a plus scratch because Merck and Bristol Myers were announcing lung cancer drug results on Monday and we wanted to be out in case the results disappointed. Well, Bristol's did (see below) while Merck's were OK and MRK jumped on the news but by Friday and settled back to our sale level.

We did purchase BMY on the news down 20% on the month. We have had luck trading Merck on bad cancer drug results this year and we think we will have the same luck with BMY. The big boys and girls are more fair weather friends than even we. Actually we are foul weather friends.

Finally we added to AT&T. the Anti-Trust trial is in progress and that is acting as a damper on the share price. The yield is 5.7%.

*****

Bristol Myers, the good and the bad.

Good

http://www.businessinsider.com/bristol-myers-squibb-immunotherapy-combination-data-2018-4

Bad

https://finance.yahoo.com/m/c76ca8fa-56ff-37bb-a793-e8a37678e0be/merck-shares-surge-anew-on.html

Analysts never cease to amaze. This fellow must have ulcers.

Morgan Stanley analyst David Risinger upgraded Merck from Equal-weight to Overweight and increased the price target from $63 to $68.

At the same time, he downgraded Bristol-Myers from Overweight to Equal-weight and slashed the price target from $78 to $58.

https://www.benzinga.com/analyst-ratings/analyst-color/18/04/11530546/one-up-one-down-morgan-stanley-flips-merck-bristol-myer

Amazon should buy Walgreens Boots.p>

https://www.investors.com/news/amazon-prescription-drugs-dog-didnt-bark-lifts-cvs/?src=A00220&yptr=yahoo

Newell

https://www.marketwatch.com/Story/newells-stock-surges-after-wells-fargo-turns-bullish-on-valuation-2018-04-17?&siteid=yhoof2&yptr=yahoo

*****

Friday April 13, 2018

We took profits on Friday selling Abercrombie and Chico's for nice gains and Verizon for a scratch gain which also included a quarterly dividend. We switched Marathon for a $2 gain to Bed Bath & Beyond which dropped 20% on Thursday to a 10 year low on a disappointing forecast (we traded last fall for a scratch loss in the lower $20s). With $12 billion in sales and a market cap of $4 billion (including net debt of $1 billion) the stock is cheap. Analysts say the BBBY has been slow to develop on-line business and that is true of the past but not the future. We bought for a recovery trade not to marry.

Markets have settled a bit. The Trumpster may reenter the TPP and declare victory if a few changes are made. President Forever Xi of China said he didn't want to impose tariffs on imported cars and also that he would be willing to discuss technology trade secrets safety. The Trumpster seems to have forgotten about North Korea for a few days what with Comey's book. And of course the 'great man's' tweets remain the daily hinge for the big boys and girls computer trading.

Hailstorm today signals spring is really here.

*****

Watch Mr. Monopoly in this clip from Mulvaney testifying before Congress.

https://twitter.com/SenWarren/status/984453740097933312/video/1

Bed Bath & Beyond Inc. shares closed down 19.95% on nearly 38 million shares traded on Thursday. The stock hit a brand new low of $17.19 during intra-day trading after announcing a weak outlook when it reported fourth quarter results. The specialty home goods retailer reported net sales of $3.72 billion, which represented an increase of 5.4% YOY. It also reported that comparable-store sales saw a 0.6% decline. Earnings per share were $1.48, a drop from $1.84 in the fourth quarter of 2016. Analysts were waiting for $1.39 a share so this was still a beat. Looking at fiscal 2018 the company is expecting net earnings per diluted share in the low to mid $2.00 range. Analysts had been expecting $2.76. CFO Sue Lattmann has said that the company is "making heavy investments in people, processes and technology as we continue the transformational work necessary to accomplish our goals." The company's board of directors also declared an increase in the quarterly dividend from $0.15 to $0.16 per share. It will be payable on July 17th to shareholders of record at the close of business on June 15th.

https://finance.yahoo.com/quote/BBBY?p=BBBY

Merck's stock surges after positive Keytruda trial results

https://finance.yahoo.com/news/mercks-stock-surges-positive-keytruda-110015060.html

*****

6 April 2018

The markets are reacting 1% to 2% on a daily basis (the drops usually being in overnight trading when volume is thin) to Trump's tariff tweets as the Trumpster loves to display the control he has over trading folks/fools psyches.

Investors continue to pay attention the Masters tournament.

The little boy who cried wolf comes to mind.

Who's trading the Trumpsters tariff announcements- inquiring minds want to know?

https://dealbreaker.com/2018/04/the-president-is-just-doing-some-light-securities-fraud/

*****

We switched AMD (at a loss on this trade but still net profitable for this year's trading in the stock) to Marathon Oil.

We currently own:

Abercrombie/Hollister, AT&T, Chico's/Black & White, Devon Oil, General Motors, General Electric, General Mills, Hain Celestial, Juniper Networks, Kroger, Marathon Oil, Macy's Merck, Newell, Rite Aid, Under Armour, Verizon, and Walgreen's Boots.

*****

Macy's:

https://finance.yahoo.com/news/why-macy-apos-m-stock-202108783.html

*****

Perspective:

An $80 one day drop in Amazon's share price is equal to a $14 stock dropping 80 cents.

*****

GE, Immelt, Welch and the blame game:

https://www.bloomberg.com/view/articles/2018-04-02/jeff-immelt-isn-t-to-blame-for-ge-s-stock-woes

*****

Below are several e-mails from a student interested in markets who is doing better than we are trading these crazy days.

4/2 Question:

Sorry, I must have missed your last response in my inbox. Any idea what's going on geopolitically right now? Looks like Trump is really cracking down on some bad eggs... and a Bill was proposed to define the dollar as a fixed weight of gold (H.R. 5404). If this were seriously debated, would that mean the loss of power for the Fed?

Response

Ain't gonna happen. There is always some congressman introducing a bill on the gold standard.

Have no idea what is going on geopolitically. Unhappily, I don't think Trump does either.

The markets have chosen to ignore the contretemps in Washington and concentrate on the tax cut as a good and hope for an infrastructure bill. The pullback in the FANG stocks is healthy and in order to continue moving higher money has to begin/continue moving to areas where stocks are showing real earnings growth and not just concepts- Tesla being the prime example of the latter. If not the concentration of dollars in the tech area and one decision ETFs is a time bomb.

Given that earnings are good and should continue so for the next few quarters there may not be much more pullback but rather a trading range developing to work off the excesses. Two 11% precipitate drops in the DJIA/S&P/NASDAQ in the last two months may be enough to cool the speculative juices.

Bitcoin etc. stuff has absorbed a good amount of speculative day trader's money and the big banks and brokers have created trading desks to take advantage of the arbitrage spreads in the ICO market and hopefully that area will absorb some/much of the money that usually skewers day to day market action.

4/3 Question:

Any timeline for a FANG bottom, or should I just be watching and paying attention?

Response:

The markets need a rest. The Fang stocks need to pull back. The Tariff stuff is just posturing -Trump is not going to screw Boeing. The markets' reaction is a needed rest from the upward move of the past few years. It would be good if the FANG stocks rested for a while and the new money rotated to undervalued stocks that are doing well but Mr. /Mrs. Market seldom does what I want. He/she has a mind of hen (new gender neutral term for his/her) own.

*****

2000 all over again_ Spotify goes public with a valuation of $29 billion:

Spotify generates third quarter revenue of $1.2 billion

(Reuters) - Music streaming service Spotify had revenue of a billion euros ($1.24 billion) in its third-quarter, putting it on track for full year revenue of more than 4 billion euros ($4.95 billion), The Information website reported on Tuesday.

FILE PHOTO: Headphones are seen in front of a logo of online music streaming service Spotify in this February 18, 2014 illustration picture. REUTERS/Christian Hartmann/File Photo

The Sweden-based company's full year revenue rose about 40 percent from 2016, according to The Information's report, which cites two investors briefed on the numbers.

Spotify could not be immediately reached for comment.

The company is the biggest music-streaming company in the world Spotify filed confidentially with U.S. regulators for an initial public offering last month and is targeting a direct listing in the first half of 2018 that would allow some longtime investors to cash out, Reuters had reported, citing a source.

The company had an operating loss of between 70 million and 90 million euros in its third quarter, suggesting that full year operating losses will top 300 million euros ($371.43 million), The Information said.

Spotify, which was valued at as much as $19 billion last year, said in June that it had more than 140 million active users while listing more than 30 million songs. Spotify last reported more than 60 million paid users, twice that of Apple Music, its closest rival.

https://www.reuters.com/article/us-spotify-results/spotify-generates-third-quarter-revenue-of-1-2-billion-the-information-idUSKBN1FR01W

*****

 


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