Lemley Yarling Management Co
15624 Lemley Drive
Soldiers Grove, Wi 54655
Bud: 312-925-5248 Kathy: 630-323-8422
Comments on activity in client accounts
26 June 2015
We sold most of our positions this week as we decided that the upside is limited and downside more likely in the next few months. We will continue to trade earnings misses in quality stocks but we will be more comfortable on the sidelines at this time. The value stocks we like to trade are not in favor and may not be until a decent correction occurs.
The economy is doing fine and Greece will soon be settled so we don't see any catalyst for a correction. But we also don't see any catalyst that will move prices much higher.
For the first half of the year accounts are flat to up a few percentage points which is the same as the performance other DJIA(flat) and S&P 500 (up 2%). Most bond indexes are flat to down on the year.
Next week should be slow since it is the 4th of July holiday lead up week.
When fear of losing money overtakes fear of not making money the correction will arrive.
19 June 2015
We sold our GM position on Thursday after it was announced that GM had hired investment bankers to consider Fiat Chrysler's interest in merging the two companies. Activist investors- also known as hedge fund vultures- have decided that GM is not rising fast enough in price and so they are seeking some catalyst to get the stock price higher so they can sell. These vultures already caused GM to agree to spend part of its cash reserve to buy back shares and raise the dividend.
We don't think these actions are positive for GM in the long run and so we are moving on. We will continue to trade the news but management needs to stand up to hedgies who may know how to trade for money but don't know how to manage an auto company (i.e. Eddie Lampert at Sears Holding). In days of yore auto companies would pay special dividends once a year if they thought their cash reserve would allow but they also knew to maintain a huge cash reserve for the bad times.
Ford almost went and GM did go bankrupt in 2008 because they had squandered their cash from the good times at the urging of these same investment bankers and hedgies. Hedgies and Investment banker loyalty is with their own colleagues not the companies that hire them. But clients never seem to be aware of that fact.
We also added a small amount of Twitter to accounts for a trade as it touches yearly lows on changes in management and bad mouthing on the street.
Up 1% and the next day down 1% seems to be the pattern. Corrections can also be accomplished over time but the high flyers still are getting buying and until they correct and take the rest of the stocks with them we remain ready to move quickly to cash.
It's all about the journey.
12 June 2015
Katie returns from her 2500 mile bike ride tonight. Hooray.
During the week we repurchased Urban which we sold last week when it dropped $2 on negative comment from Jim Cramer. We also bought more Sprouts on negative comments from Cramer and repurchased AT&T and Verizon for the July dividend and/or a short trade.
Stocks headed south Monday and Tuesday but on Wednesday the major measures popped over 1% on "?" news. And so go the summer doldrums. Our guess is that present levels remain at least until month/quarter/fiscal year end June 30 for many institutional accounts. After that it's all a guess.
The economy is strong but rising interest rates and the Supremes' Obamacare decision are the current potentially negative wild cards. Greece default seems to be a ho hum for now.
5 June 2015
Oh Lord, the Unemployment Rate is down to 5.5% and the economy added 280,000 new jobs in May. What more can go wrong???
Predictably, markets swooned on the wonderful- for workers- Employment Report, since such news suggests the Fed will probably start placing its foot upon the brakes to begin letting interest rates rise. Of course Europe remains in the doldrums and China growth is slowing so who knows.
During the week we switched GM common to the warrants to maintain our position while raising a little cash. We paid a 1% premium for the warrants versus the stock sale but since the warrants don't expire till 2019 we think that premium is worth it for the cash it makes available to increase our position by buying more warrants at lower prices if the markets don't treat us well. GM is our largest holding and it is currently considered a value trap—i.e. it is very cheap but none of the big boys and girls want to own it and until they do it will remain out of favor. With a huge cash pile and over $200 billion in sales it is a significant stimulus and an integral part of the American economy. Eventually we are guessing/hoping/expecting the gurus to tire of paying 100 times earnings for concept stocks and maybe return to value. At least one can hope.
We also took short profits in Urban, and Ralph Lauren (which we bought last week when it broke and sold this week) and bought Verizon and added to PG.
We are enjoying the nice weather and being home from a hectic one week tour of the East Coast, seeing our bride of 50 years (who thankfully is close to the end of her amazing ride), getting lost in Philadelphia, and enjoying reconnecting with a lot of old folks who were a lot younger when we first knew them and them us. And the beat goes on.
We currently own:
GM B warrants; Old Second Bank; Abercrombie & Fitch; The Gap;
Whole Paycheck; Sprouts Food Markets; Alcoa; Sprint
Marathon Oil; Proctor & Gamble; Verizon
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