Lemley Yarling Management Co
309 W Johnson St
Madison, WI 53703
Comments on activity in client accounts
18 November 2022
We are traveling next week so our next post will be December 2.
The markets were mixed this week with Monday/Tuesday being 500 plus point move days for the DJIA. The rest of the week was tamer but still involved 1% up/down daily moves.
Thanksgiving week is usually positive and the seasonals are favorable but the computer boys and girls are always ready to add to the volatility. They don't care whether prices are up or down; they just want volatility. And thin (low volume) markets that we will have next week are just the ticket for computer gyrations.
On Monday we decided to lock in more gains from the previous week and moved to a 50% cash position in larger accounts. We then redistributed some of the cash into mor staid issues such as Intel, AT&T, Verizon, the domestic bank ETF (KBWB). We also traded our retails stocks pre and post earnings for nice profits. We sold The Container Store and Paramount Plus for losses and will reconsider them at the end of December.
We added one new issue, Dentsply. The symbol is XRAY and it is a leading dental supply company. It's been under pressure all year because former executives fiddled with earnings reports to enable greater bonusses. XRAY has a new CEO from Becton Dickinson and a new CFO and has restated its earnings for the subject quarters.
We now own: Disney, Twilio, Verizon, AT&T, KBWB, Key Bank, Intel, GSK (Glaxo Drugs), Organon (women's health), XRAY, Macy's, Portillo Hot Dogs and Ford.
We wish all a peaceful Thanksgiving.
Armistice Day 2022
Thank you, Mr. Market. We were fully invested when the positive inflation report (a drop in core inflation of food and energy and also the overall number) led to a 5% rally on Thursday. When the rally in our stocks continued into Friday, we took profits and a loss or two to replenish cash in accounts.
We sold the fancy stocks we had purchased for a trade and also eliminated -for profits or scratches- all non-dividend paying stocks except for our 2 retail issues, Under Armour and The Container Store. For the latest quarter Under Armour reported better than earnings and while TCS reported less than it remained profitable and at 5 times expected annual earnings. The one other non-dividend stock we now hold is Disney which we repurchased this week when it dropped 12% on less than to an 8 year low.
We continue to own Verizon, AT&T, Citicorp, Truist Banks, Key Banks, GSK (Glaxo Drugs), Organon (women's health) Paramount and Ford.
We also repurchased Walgreens higher than where we sold when WBA announced the purchase of Summit Health and analysts approved and raised ratings on the company. This may be the catalyst that brings WBA's share price back into the land of the living. https://www.fool.com/investing/2022/11/07/walgreens-villagemd-agrees-to-9-billion-deal-for-s/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
We still own our retail contingent of Foot Locker, Tapestry (Kate Spade & Coach), Macy's, Nordstrom, Levi Strauss, The Gap, Under Armour, and The Container Store. We traded out of Abercrombie (no dividend) for our fifth trading profit of the year.
We did predict the lower CPI (inflation number) although we thought the turndown would occur on October not November. The one month lag did cause us some give back; but Thursday's blast higher recovered the pullback and then some. All but the smallest accounts are profitable for the year (and the small ones will pop as/if the rally continues) and the seasonal action suggests higher into year-end since we have endured the early November weakness that usually occurs.
Sometimes it's better to be lucky than smart but being both is the best.
The purpose of bitcoin is to replace cash. Then why did the bitcoin exchanges which are failing need an infusion of cash?
FTX investors have been warned that the crypto exchange may be forced to file for bankruptcy protection if it doesn't get a cash infusion, Bloomberg reported Wednesday. (It filed bankruptcy today)
The news follows reports that Binance balked at an earlier promise to buy the troubled trading empire after looking at its books. Bloomberg reported the FTX exchange faces an $8 billion shortfall.
FTX has been on a tailspin for a week following CoinDesk's reports of the blurred lines in the books of Sam Bankman-Fried's once-mighty empire.
4 November 2022
We now inhabit a market where good news is bad news. According to the gurus the addition of 261,000 jobs in October was too hot when the ‘experts' guesses were that 200,000 jobs would be added. The 261,000 was down 50,000 from jobs added in September.
Markets were down for the week for the first time in five weeks. Wednesday's Fed announcement of a 75 basis point hike sent the markets into gyrations as the computer boys and girls pushed the DJIA 400 points higher in the first 15 minutes after the Fed announcement before reversing and slamming the major measures when Chairman Powell was speaking sending the DJIA down 400 points on the day. The intraday move was (1200 points – 4%, Ho Hum)
Friday also was at the mercy of the computer kids as an early 500 point DJIA gain was erased then regained to close up 400 for a 1400 point intraday move.
Our guess is that this up/down action will continue till the November or December CPI numbers exhibit any weakness.
We have been trading our positions for scratch profit and losses. It seems like every time we relax and feel good about accounts being back in positive territory for the year Mr. Market serves us a dish of humble pie.
This week we added Google, Amazon, Marvel Tech (chips nor Spiderman), and the NASDAQ 100 QQQM to larger accounts. All are down 50% from highs and were owned and sold by us at much higher levels.
We continue to suffer with Paramount and Newell. Both are 20% losers for us and Paramount has been a thorn for many years. But with now 6% yields we plan on riding this selling pressure out. We sold AMCX ahead of earnings (which were good-stock is priced at 3X earnings) and bought back 10% lower today. We did the same with Organon. We continue to trade The Gap for 5% profits and were able to repurchase the stock today. GSK (Glaxo) had good earnings and we added to holdings shares after the report. GSK pays a 5% dividend.
And so, it goes.
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