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Lemley Yarling Management Co
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Madison, WI 53703
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Beautiful Horse Farm, Excellent Hunting Land, Perfect for Home-Based Entrepreneurs

18 December 2020

Today is quadruple witching, plus the day that Tesla enters the S&P 500, so there has been a lot of volume as the indexers and near indexers do their thing.

As we listen to the talking head suggest stocks selling at price to sales ratios- usually because the companies have nil or very minimal earnings compared to their prices- we recall similar eras after 50 plus years in the business.

We were trained by the "old stockbroker" who was a millionaire in April of 1929 and a much poorer fellow in December of 1929. With his experiences over the years- the depression, WWII, The Korean War, the Kennedy assassination. 90% tax rates, et al, he understood and communicated the difference between speculation and investing. We have survived similar times -when greed overcame fear -such as the collapse of 1974, the slow steady pullback of 1982, the crash of 1987, the prewar collapse in 1990, the S&L and annuity crisis of the 1980s & 1990s, the DotCom bust of 2000, the recession and market collapse of 2008-2009 and the scary happening in March of this year.

With 10% to 20% gains in client accounts we are exercising caution rather than aggressively seeking outsized gain. We still remember our sleepless nights in March and rather than celebrating our perspicacity and investment acumen we realize the luck that has led us to this month. We are not the Masters of the Universe we were when we were younger back in 1987 before we were humbled by the Crash that year and by the 1990 prewar collapse. The current hubris of many market mavens may suffer the same fate as ours of 30 years ago

But it is holiday time and so we happily accept the gains we have and hope to keep. We have adjusted portfolios to own stocks that we have traded profitably but which still remain down substantially on the year. Our guess is that they are under year end selling pressure from investors and hedgers taking losses to offset gains. Hopefully they'll 10% or more in the new year at which time we will move more aggressively to cash. In most large accounts we still have a 50% or more cash position.

We currently own: Gilead, EOG, Intel, The Major Bank ETF, the Domestic Oil ETF, AMC Networks, AT&T, Abercrombie, The Gap, Bed Bath, GE and Ford.

This is our last post till January 8, 2021. Happy Holidays, and New Year. Please stay safe.


Christmas Trees

By Robert Frost

(A Christmas Circular Letter)

The city had withdrawn into itself
And left at last the country to the country;
When between whirls of snow not come to lie
And whirls of foliage not yet laid, there drove
A stranger to our yard, who looked the city,
Yet did in country fashion in that there
He sat and waited till he drew us out
A-buttoning coats to ask him who he was.
He proved to be the city come again
To look for something it had left behind
And could not do without and keep its Christmas.
He asked if I would sell my Christmas trees;
My woods—the young fir balsams like a place
Where houses all are churches and have spires.
I hadn't thought of them as Christmas Trees.
I doubt if I was tempted for a moment
To sell them off their feet to go in cars
And leave the slope behind the house all bare,
Where the sun shines now no warmer than the moon.
I'd hate to have them know it if I was.
Yet more I'd hate to hold my trees except
As others hold theirs or refuse for them,
Beyond the time of profitable growth,
The trial by market everything must come to.
I dallied so much with the thought of selling.
Then whether from mistaken courtesy
And fear of seeming short of speech, or whether
From hope of hearing good of what was mine, I said,
"There aren't enough to be worth while."
"I could soon tell how many they would cut,
You let me look them over."

"You could look. But don't expect I'm going to let you have them."

Pasture they spring in, some in clumps too close
That lop each other of boughs, but not a few
Quite solitary and having equal boughs
All round and round. The latter he nodded "Yes" to,
Or paused to say beneath some lovelier one,
With a buyer's moderation, "That would do."
I thought so too, but wasn't there to say so.
We climbed the pasture on the south, crossed over,
And came down on the north. He said, "A thousand."

"A thousand Christmas trees!—at what apiece?"

He felt some need of softening that to me:
"A thousand trees would come to thirty dollars."

Then I was certain I had never meant
But thirty dollars seemed so small beside
The extent of pasture I should strip, three cents
(For that was all they figured out apiece),
Three cents so small beside the dollar friends
I should be writing to within the hour
Would pay in cities for good trees like those,
Regular vestry-trees whole Sunday Schools
Could hang enough on to pick off enough.
A thousand Christmas trees I didn't know I had!
Worth three cents more to give away than sell,
As may be shown by a simple calculation.
Too bad I couldn't lay one in a letter.

I can't help wishing I could send you one,
In wishing you herewith a Merry Christmas.


11 December 2020

Markets vacillated during the week with the goofy stocks jumping 5% one day and retreating 5% the next. Tesla is selling $5 billion of stock which will help the Index funds that have to buy a bunch of it on the 21st and Airbnb and Door Dash came public, each doubling their value in the first hour of trading. We are tired of crying wolf and noticing that the emperor has not clothes but…

We are maintaining a healthy cash position and trying to control our greed. Listening to the talking heads there seems to be no fear and, of course, that is a negative indicator- that can/and has existed for a long time. We can foresee of no reason for the markets to collapse or even correct. But then history suggests that corrections occur out to the blue from unforeseen events.

We currently own Intel, Gilead, Canadian Solar, BankAmerica, Carpenter Tech, Koppers, British Petroleum, United Natural Foods, Abercrombie, The Gap, Bed Bath and Ford. This week we took trading profits in AT&T, GE, Murphy Oil, EOG, Lyft, Abercrombie on Monday repurchasing on Friday at less than ( did the same for Canadian Solar) and a scratch loss in AMC networks.

When we started in the business 50 years ago price earnings ratios of 10 were the gold standard of value with a decent dividend expected, with growth stocks allowed a 20 times valuation if they were growing earnings (not sales) at a 20% rate. But as times change so do markets and now the new wonder stocks are valued at ratios of price times sales with little consideration of earnings – if there are any. We were reminded of this new reality when we read the following analyst recommendation: Jaluria said he remained positive on the stock, but added that PagerDuty is "fairly valued" at enterprise value 13-times expected 2021 revenue

And of course, there is the wonder stock Snowflake.

Snowflake's 10% rally on Tuesday helped propel the stock to a market valuation of more than $120 billion, surpassing the likes of tech behemoths IBM and AMD. (IBM has sales of $75 billion and net earnings of $8 billion. Snowflake $1 billion and $0)

Snowflake is a cloud-data storage firm that debuted to the public in a September IPO, pricing its shares at $120. The firm raised $3.4 billion at a valuation of $33 billion in its IPO, making it the largest software IPO in history.

As of Tuesday's, intraday high of $429, Snowflake had staged a 258% rally since going public. Snowflake was valued at just $12 billion in February when it completed its last private funding round, meaning those investors have registered 10 times gain if they held their shares through today.

For context, IBM currently has a market capitalization of $112 billion (IBM has sales of $75 billion and net earnings of $8 billion. Snowflake $1 billion and $0), while AMD is worth $111 billion (with sales of $12 billion and earnings of $1 billion).


Snowflake CEO Collects a $108 Million Payout — Every Month

A compensation package he received upon joining Snowflake in April 2019 awards him a batch of options every month -- for four years -- that are now worth more than $108 million each, or about $1.3 billion annually. (That is more than the company's expected revenue for the year.)


4 December 2020

When is enough, enough? Most accounts are up 6% to 14% this year after being down 20% and more March 31. Given that we averaged 50% cash for the year we are pleased and thankful and considering gift horses etc., we have raised more cash this week.

We did repurchase GE on Thursday after selling Tuesday because on Thursday Boeing announced it had received a new order from Ryanair for 75 more Boeing Max's to raise their total order to 210 MAX 737s. GE provides engines for the planes. The MAX jet is powered by LEAP-1B engines made by CFM, a joint venture of GE and French Safran.

We also were swamped by oil as we tried to trade Monday and then sold Tuesday but bought back Friday after OPEC on Thursday decided positively for oil prices


This Time Magazine article was written in 2015 (when some folks still read magazines) explaining the DOT COM crash of March 2000. Since then the markets are 100-% higher and Robinhood zero commission option trading is rampant.

But in March of 2000, 15 years ago, one of those things came to a crashing halt. The dotcom bubble, which had been building up for the better part of three years, slowly began to pop. Stocks sunk. Companies folded. Fortunes were lost, and the American economy started to slip down a slow mudslide that would end up in full-on recession.

The dotcom bubble started growing in the late '90s, as access to the internet expanded and computing took on an increasingly important part in people's daily lives. Online retailing was one of the biggest drivers of this growth, with sites like Pets.com — you know, the one with the cute sock-puppet mascot starring in the funny ads — getting big investors and gaining a place in American consumer culture.

With the investment and excitement, stock values grew. The value of the NASDAQ, home to many of the biggest tech stocks, grew from around 1,000 points in 1995 to more than 5,000 in 2000. Companies were going to market with IPOs and fetching huge prices, with stocks sometimes doubling on the first day. It was a seeming wonderland where anyone with an idea could start making money.

The Burst

In March of 2000, everything started to change. On March 10, the combined values of stocks on the NASDAQ was at $6.71 trillion; the crash began March 11. By March 30, the NASDAQ was valued at $6.02 trillion. On April 6, 2000, it was $5.78 trillion. In less than a month, nearly a trillion dollars' worth of stock value had completely evaporated. One JP Morgan analyst told TIME in April of 2000 that a lot of companies were losing between $10 and $30 million a quarter — a rate that is obviously unsustainable, and was going to end with a lot of dead sites and lost investments.

Companies started folding. (Pets.com was one.) Magazines, including TIME, started running stories advising investors on how to limit their exposure to the tech sector, sensing that people were going to start taking a beating if their portfolios were too tied to e-tailers and other companies that were dropping like flies.



Is Tesla 2021's Yahoo?

Timing is hard for investors and indexers alike. Yahoo's market capitalization peaked less than a month after it was added to the S&P 500 in December 1999—just before the burst of the dot-com bubble. Qwest Communications' market cap peaked the same day it was added to the index in July 2000. Neither stock trades today.


Shares in Tesla jumped on Thursday after Goldman Sachs upgraded its stock to "buy" from "neutral" and boosted its price target to $780, currently the highest on Wall Street.

Tesla stock rose as much as 3% in pre-market trading. The electric vehicle maker's shares are up 592% year-to-date, boosted by its upcoming inclusion in the S&P 500 on December 21 and fading concerns about its ability to make profits.

Goldman's strategists wrote in a December 2 report that "the shift toward battery electric vehicle adoption is accelerating and will occur faster than our prior view."

They noted battery prices are falling faster than expected, while governments around the world are passing regulations that could entirely phase out higher-emission vehicles within 10 to 20 years. That, in turn, is improving the sales outlook for electric vehicles.

Other lesser-known product offerings, including solar roof installations for homes, will add to Tesla's long-term sales and potential, in Goldman's view.

Goldman Sachs

"The energy business should also benefit from the regulatory shift toward carbon reduction and clean energy, and solar market valuations have similarly accelerated," strategists wrote.


Thoughts on valuation:

Chewy $30 billion no earnings; Splunk $33 billion no earnings; Fastly $10 billion no earnings; Snow $81 billion no earnings. We always wondered why founders named their company Yahoo. We guessed they had never read Gulliver's Travels. Same goes for Snow which brings to mind snowflakes. Ah well it's all wonderful while it lasts.

Snowflake (SNOW) said it expects fourth quarter product revenue of $162.0 million to $167.0 million. The current consensus revenue estimate is $177.12 million for the quarter ending January 31, 2021. (SNOW only has 4 million shares available for trading- called the float- and it trades 6 million shares a day with 6 million shares short. Yes, more shares have been sold short than are available. There is a rule that you can't short unless you can borrow stock. SEC, where are you?).


AMC Networks Used Streaming Video Services to Beat the Street



Walmart, McDonald's, Amazon, Dollar Tree, FedEx, rely on having workers on SNAP and Medicaid



Hope springs eternal and so do bond maturities

Peru's 100-Year Bond Sale Shows Markets Can Defy Political Chaos






The 1000-year bond: A Danish energy company just issued debt with a maturity date of 3017



Headlines for IPOs

DoorDash Sets IPO Price Range of $75 to $85 a Share-$35 billion valuation

For the nine months through September 30, revenue was $1.9 billion, up 226%, with the pandemic adding fuel to the company's growth. The company had a loss for the nine months of $149 million, narrowing from $534 million in the year-earlier period.

For the nine-month period, DoorDash posted a profit on an adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) basis of $95 million. Note that both Uber Technologies (UBER) and Lyft (LYFT) have yet to reach adjusted Ebitda break-even — both expect to get there in 2021.

DoorDash had a GAAP profit of $23 million in the second quarter, but slipped back to a $43 million loss in the third quarter. The company had adjusted Ebitda profits of $79 million in the second quarter and $86 million in the third quarter.


Back in 2000 AOL purchased Time Warner in 2000 for $100 billion. ($150 billion in 2020 dollars). (Only old fogies like us still have AOL email addresses)

It turned out that after the dotcom crash, an overly inflated AOL was forced to take a monstrous goodwill write-off of nearly $99 billion on Time Warner in 2002. AOL's market value slumped from $226 billion to around $20 billion. A few years later Time Warner spun off its Time Warner Cable division and then AOL as independent companies. The vastly shrunken AOL was acquired by Verizon in 2015 for just $4.4 billion.



Winter Trees

This morning from the trees we hear
the pop of limbs and snort of deer
as winter again claims the land
and takes all firmly in its hand.

The horses hobble on icy hoof
as snow packed hard turns to ice,
the pigeons cling to barnyard roof
waiting for the sun to rise.

Frosted fields beckon us
to wander in the diamond land
since hunting season now is past
walk we will with staff in hand.

All the trees unclothed to show
the cuts and sores of seasons past,
some strong, some weak, some firmly
planted, others leaning on their last.

Up on the knoll where cutters came
the battlefield assaults our eyes
the stooped and scraggly underbrush
mourn the mighty trees demise.

How needed was the one new house?
that came from maple strong and swell
progress is the calling card
of loggers seeking trees to fell.

Woodworkers use the fallen log
They seldom take a living tree
They understand the pact they make
To create art from death for free.

BL 03 December 2002



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