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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

Washington's Birthday 2019

Markets meandered this week and we spent the time buying quality companies that missed.

CVS, the drugstore company, dropped 10% on an earnings miss and our purchase makes a nice companion to our Walgreen Boots position. These two major drugstore chains are taking a different approach to the future with CVS buying Aetna Insurance in 2018 while WBA has chosen a more traditional path.

We also tepidly purchased Kraft Heinz in small amounts in many accounts as it crashed 20% (to $35 down from $90 a few years ago). Warren Buffet owns 350 million shares (26%) of the company and a Brazilian Company 3G owns 22%. Should be an interesting next few months with this stock.

We abandoned Activision (sorry Aby and Tyler) when it zagged instead of zigging. Some trades don't work. We lost 5% on the trade.

We added Southwest Airlines when it dropped $3 on a Goldman downgrade. We traded the company in January for a nice profit at slightly lower prices. It is the only airline that has more cash on hand the debt.

We also repurchased Baker Hughes (which we also traded for a scratch profit at lower prices) in January. BHGE announced improved earnings and revenue and we decided to hop back on. GE wants to sell the position and we think the shares with the good earnings can (magically) climb back into the $30s before GE sells.

Markets are awaiting the conclusion of the China trade talks at which time the Trumpster will declare victory no matter what the outcome.

We have re-ordered portfolios into quality companies having temporary (we hope) issues. Time will tell.

W currently own:

AT&T, Walgreen Boots, CVS, Coke, Twitter, Southwest Air, Newell Cos, Kraft Heinz, Hain Celestial, Teva Pharmaceutical, Marathon Oil, Baker Hughes, GE, Ford, Avon and Ascena.

*****

15 February 2018

The markets seem to want to go higher and we have been using our large cash position to add some anchovy trades with companies we have followed for years that are missing their earnings expectations.

During the week we added Coke, down $3.50 on an earnings miss for a safe trade. Since it is part of the DJIA if the markets move higher it should recover from the sell off and give us a 10% profit over the next few months when the dividend we will earns shortly is included.

https://finance.yahoo.com/news/coke-4q-earnings-snapshot-121022615.html

We also added Activision Blizzard @ $46. Activision is huuuuggge in the gaming industry. ATVI missed and dropped $3 on Monday and is down from $65 in November 2018 and $85 in September 2018. After the carnage clears we think the trade will work. (Abby and Tyler, the grandkids -now adults -suggested this one.)

https://finance.yahoo.com/news/activision-blizzard-hit-bottom-cycle-155538802.html

Last Friday we sold Coty when it popped 15% on earnings. (Earnings were nothing to write home about but were better than.) We bought Coty back slightly higher on Monday when the shares continued to be purchased even though enough volume had traded to allow the short sellers to cover. That was why we thought it had gained on Thursday and Friday. Then on Tuesday JAB Holding, a European company (https://www.jabholco.com/ ) that owns 40% of Coty announced that they would purchase another 20% at $11.65 and the shares popped another 15%. (The 3 day rise in the shares then became understandable since often European bids for stocks are known by some folks before the bids are publically announced.) We sold because the shares became an arbitrage situation until the purchase is completed with the $11level as resistance because it is a partial tender.

https://marketrealist.com/2019/02/coty-stock-rose-12-5-jab-offered-to-raise-stake?utm_source=yahoo&utm_medium=feed&yptr=yahoo

With some of the money from Coty we reestablished a small holding in Avon which we had also sold on Friday. Avon was set to announce earnings on Wednesday and we guessed that if the earnings were good it would pop. Bad guess. Also, as we noted last week Coty had bid $10 billion for Avon a few years ago. Luckily for Coty, Avon turned them down. (Avon is now valued at $2 billion.) Maybe Coty/JAB will develop an interest if and when AVP gets its own house in order.

https://www.thestreet.com/investing/earnings/avon-products-tanks-on-revenue-miss-softness-in-latin-america-sales-14866738?puc=yahoo&cm_ven=YAHOO&yptr=yahoo

On Friday Newell disappointed big time and shares dropped 20% from where we sold 3 weeks ago (for a scratch profit). With a 5% yield and having paid down $3 billion of debt in the last year we reentered for a trade/hold.

https://finance.yahoo.com/news/newell-plunges-forecast-revenue-decline-135518618.html

We also bought Teva Pharma, the generic drug company, when it lost 15% on worse than. We had sold TEVA for a scratch profit three weeks ago 10% higher than our reentry point.

https://finance.yahoo.com/news/teva-pharm-sees-weaker-expected-124411097.html

Marathon announced excellent earnings and moved 10% higher during the week,

https://finance.yahoo.com/news/marathon-oil-earnings-mro-stock-013025979.html

Twitter:

https://www.thestreet.com/investing/stocks/twitter-shares-jump-after-morgan-stanley-reveals-5-6-stake-14865620?puc=yahoo&cm_ven=YAHOO&yptr=yahoo

7 million late on Car payments:

https://www.huffingtonpost.com/entry/car-loan-payments-fed_us_5c637947e4b07115222b2014

Say What! Amazon increases prices at Whole Foods:

https://www.vox.com/the-goods/2019/2/12/18222200/whole-foods-price-increase-amazon

Amazon paid no taxes last year- in fact received a tax refund. And New York was going to pay them $3 billion to locate in Queens. https://www.huffpost.com/entry/amazon-federal-taxes-2019_n_5c660227e4b01757c369c5b3

8 February 2019

As we watched Amazon and Google move lower during the week (they have been market leaders for the past 15 months) and because of the substantial recovery in our accounts since year end we decided to raise cash. We also recalled that our accounts had risen smartly in early 2017 and 2018. Those two years we remained invested to our ultimate dismay.

We decided that this third time we would vary our actions by taking a large chunk of money off the table. And so beginning on Wednesday we took profits and a few scratch losses to get many accounts to 50 % cash. We also have an oversize position in accounts in AT&T which yields over 6%. The 6% dividend gives us $2 downside protection over a year.

We will continue to trade earnings misses in quality stocks such as Intel and retail stocks as they report this month, but for now we plan to remain on the sidelines.

We currently own: AT&T, Walgreens Boots, Under Armour, Hain Celestial (which reported bum earnings and dropped 10% this week) Marathon Oil (our sole oil stock), and normalized holdings in GE and Ford.

We are watching: Teva Pharmaceutical, Coty (in which we realized a nice profit this week, United Natural Foods, Bristol Myers Intel, IBM, Viacom and others.

*****

Hain Celestial, Ugh!! : https://finance.yahoo.com/news/hain-celestials-hain-q2-earnings-140002380.html

Coty, good earnings and also a nice profit on short covering bounce.

https://finance.yahoo.com/news/coty-coty-q2-earnings-beat-155303839.html

United Natural Foods Sues Goldman Sachs for Not Disclosing That It Would Behave Like Goldman Sachs

https://dealbreaker.com/2019/02/goldman-sachs-scorpion-and-the-frog

Speaking of taking advantage:

https://www.businessinsider.com/hedge-funds-moving-to-0-management-fees-2019-2

So now the institutional investors are encouraging the hedge funds to take more risk to beat the market since the hedge fund managers won't earn anything if they don't. Go figure

*****

1 February 2019

GE popped over $10 on Thursday on better than and we used the gain to reduce positions a bit. We still have an oversized position in the stock in many accounts.

We also added Avon Products to our holdings. (See below.) we have reentered Rite Aid in the past few weeks after reading their most recent report. On Thursday Rite Aid announced that they were considering doing a reverse split of 1 for 10 or 1 for 15 to maintain their listing on the NYSE. Usually reverse splits result in lower total value and so we are holding back on buying more shares. The price dropped from $1 to $.80 on this news. One positive of a reverse would be that more folks could buy the shares since the price would be above the $5 price that many brokerage houses place as the lower price limit on what their wealth advisors can recommend.

We repurchased Michael's Stores when It dropped 10% on Wednesday to near its 10 year low on a disappointing update and store closing announcement. We have continued to add to Intel, AT&T and other issues we won with the funds raised form selling GE.

We are going to maintain our fully invested posture for now.

Bill Miller, a well known value investor, says there's a very interesting risk-reward on Avon and Coty

https://finance.yahoo.com/news/portfolio-manager-stock-could-10-194038209.html

GE reports strong Q4 sales, stock surges

https://finance.yahoo.com/news/general-electric-ge-earnings-q4-revenue-stronger-130434485.html

Robert Swan named Intel CEO

https://techcrunch.com/2019/01/31/robert-swan-named-intel-ceo/?yptr=yahoo

Michaels Set to Close Pat Catan's Stores, Updates Q4 View

https://finance.yahoo.com/news/michaels-set-close-pat-catans-151803338.html

Ford Ranger demand is through the roof; 'massive overtime' shifts planned to keep up

https://www.autoblog.com/2019/01/31/ford-ranger-demand-high-more-production-coming/?ncid=edlinkusauto00000021&yptr=yahoo

Why Ford Stock Can Rise Above $10 in 2019

https://finance.yahoo.com/news/why-ford-stock-rise-above-155733115.html

Analysts: AT&T Earnings Weren't That Bad

https://finance.yahoo.com/news/analysts-t-earnings-werent-bad-154801401.html

*****

 


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15624 Lemley Drive Soldiers Grove, Wi 54655 312-925-5248
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