Lemley Yarling Management Co
309 W Johnson Street
Madison, WI 53703
Comments on activity in client accounts
27 December 2019
Markets continue to move higher as the rosy scenario reigns supreme. We are adding stocks (depleting cash) for trades into the new year since we think markets continue to rhyme with 1999 into 2000, also the start of a new decade after years of outsized gains.
We continue to add to positions of depressed stocks expecting the selling pressure to end next week if not before.
For personal reasons we sold Urban Outfitters for a 10% gain and repurchased Macy's with the proceeds. We also eliminated Kraft Heinz for plus scratch- their debt load bothers us- and moved the funds to Sprouts and Hewlett Packard Enterprises.
Happy New Year!
Winter Solstice 2019
Markets continue to grind higher as do our accounts. We have been aggressively adjusting accounts to take advantage of year end tax selling. In the last week we sold XOP and Apache for 10% 2-week gains; GM, Twitter and Under Armour for 5% plus gains; Macy's for a plus scratch and Rite Aid for a very lucky 30% two-day gain.
With the funds realized we have been adding to the issues we already own. Our view remains that the rally will last into next year with the tax loss issues we are buying offering the best percentage gain potential as they did last year.
On Thursday Ascena completed a 1 for 20 reverse split and so reduced shares outstanding from 200 million to 10 million. Market value remains the same. We continue to believe/hope that the company survives and the position remains a small speculative part of overall portfolios.
We currently own: AT&T, Cisco, ViacomCBS, Kraft Heinz, Walgreens Boots, Sprouts Food Markets, Box, United Natural Foods, Nokia, Urban, Tapestry (Coach and Kate Spade) Abercrombie, The Gap, American Eagle, Michaels, Ascena, Shake Shack, and Beyond Meat.
13 December 2019
In the spirit of Paraskevidekatriaphobia today is a good time to visit the dark side of market exuberance.
Markets rallied during the week on Trump's tweets of a China trade deal. On Friday Boris the Brave won a large majority in England which suggests Brexit will finally occur at the end of January- or so the gurus say. That election added a good tone to the markets.
We don't know why since leaving the EU will create a divisiveness in Europe that hasn't existed for many years. The Ukraine imbroglio, the French strikes, and the unsolved refugee question of folks from the African continent seeking solace in the countries that ruled and raped them for hundreds of years, suggests that the European miasma is heading back to the bad old nationalism days of the last century.
Authoritarian governments are becoming the norm, climate change continues unabated and unacknowledged by many of the worst contributors, and more money remains the end all and be all of existence. The good feelings of the fall of the Berlin Wall are diminishing or forgotten; and the renaissance of democracy in Eastern Europe is reverting to authoritarianism. India and Pakistan continue to fight over Kashmir while Indian Prime Minister Modi (seeks to make Moslems second class citizens (all 200 million). Saudi Arabia won't stop its incursions in Yemen and the Middle East is still a powder keg as Iran, Iraq, Israel, and the Palestinians can't/won't reach accommodation. It has been this way for many years but the leadership of Western Europe and the U.S. are no longer in sync. The post WWII alliances are in trouble.
History never repeats but it does rhyme and those who haven't read history etc.….
Hopefully, next week we will be more in the Christmas Hanukkah spirit.
During the week we repurchased American Eagle and United Natural Foods when both dropped on downbeat earnings forecasts. The retailers and other stocks we are buying now are only anchovy trades into the New Year. Given our downbeat outlook for comity in the New Year, coupled with our feeling that the markets are rhyming with the 1999 into 2000 markets, we will be more content when we are back to a larger cash position in accounts. But we do think that -as in 1999 -markets will rally into the New Year and give us the opportunity to earn a 10% return in accounts by early February- as the markets did last year.
Modi and Kashmir
6 December 2019
During the week we continued to add value stocks to accounts. Oil issues continue under pressure and we have repurchased XOP and Apache both on forever lows. Kraft Heinz has a 5% yield and Buffet is still stuck with it. General Motors yields 4% and CEO Mary Barra has a good handle on the company's electric vehicle future.
We currently own:
AT&T, Cisco, ViacomCBS, Kraft Heinz, General Motors, Domestic Oil ETF, Apache Oil, Shake Shack, Twitter, Sprouts Food Markets, Hewlett Packard Enterprises, Nokia, Tapestry, Abercrombie, The Gap, Under Armour, Urban Outfitters, Macy's, Michael's, and Ascena.
Michael's missed on earnings and revenues and suffered for it. But it sells now at 3 times forecast earnings. From the company's press report:
For fiscal 2019, the Company now expects:
- net sales to be between $5.06 billion and $5.08 billion;
- comparable store sales to be down approximately 2%;
- to open net 16 new Michaels stores, inclusive of 12 Pat Catan's stores the Company plans to rebrand and reopen, and relocate 13 Michaels stores;
- adjusted operating income to be in the range of $565 million to $575 million;
- interest expense to be approximately $152 million;
- the effective tax rate to be between 23% and 24%;
- adjusted diluted earnings per share to be between $2.07 and $2.12, based on diluted weighted average shares of approximately 153 million; and
- capital expenditures to be approximately $125 million
CBS and Viacom complete merger. New symbol VIAC
GM building an electric battery factory in Ohio
Getting ready for a reality war?
The Trump administration is reportedly considering sending as many as 14,000 additional U.S. military troops to the Middle East as part of an effort to counter Iran. The deployment would also include dozens more ships and military hardware, U.S. officials said. In May, Trump announced that hundreds of troops would be sent overseas to the Middle East, and that number is now at roughly 14,000 U.S. military personnel in the region. Then-National Security Adviser John Bolton…. the decision was a result of "a number of troubling and escalatory indications and warnings" of threats from Iran, adding that the move was meant to "send a clear and unmistakable message" to the country as a deterrent.
Having just reached 76 and after 30 wonderful years owning the prettiest farm in America, we have decided that a move to a Madison, Wisconsin apartment while maintaining a small cabin in the area is the proper way to begin the next chapter of our lives.
Of course, we plan on continuing Lemley Yarling Management Company- Old traders (52 years and counting) never quit until ----.
With that in mind we have listed our farm for sale.
Comments on activity archives
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