Lemley Yarling Management Co
309 W Johnson Street
Madison, WI 53703
Bud: 312-925-5248 Kathy: 630-323-8422
Comments on activity in client accounts
27 February 2015
During the week we traded out of DreamWorks at a small loss and sold
Marathon and BankAmerica at scratch profits. We also repurchased American
Eagle which reports next week. We repurchased because The Telsey Group, a
well-respected firm that concentrates on analyzing retail companies, raised its
opinion to outperform. This change was initiated a week before earnings which
we consider significant. We also added shares of Abercrombie to some accounts
when it continued its drop on a Morgan Stanley sell recommendation.
Interestingly, the Telsey Group placed an outperform rating on ANF at the same
time it raised AEO.
The Go GO stocks (certainly a dated term but then so are we) continue to lead
the market inexorably higher with the NASDAQ touching 5000 for the first time
in 15 years. Many of the stocks that led it to 5000 long ago are skeletons of their
former selves. on a similar note--The Nikkei is still 30000 points below its 1989
high although it is up 125% in the last three years.
The major stock market Indexes and Averages are supposed to be unmanaged
but if the powers that be didn't periodically replace with hot stocks the folks
who own those measures wouldn't be able to sell the use of them for market
reports, futures trading, options and ETFs. If the DJIA still had Bethlehem Steel
and Xerox and other formerly vibrant now defunct issues of times gone by there
would be little interest in using the averages/indexes for trading.
20 February 2015
During the week we sold Huntington Banks for a scratch profit and placed the
proceeds in additional shares of Fifth Third Bank. Our guess is that the
percentage gain potential is greater in FITB. We also reduced our position in
DreamWorks to a more manageable level taking a small loss.
Markets continue to hold at record levels. Every social internet idea is now
worth a billion dollars and the no earnings concept stocks continue to be the
darlings of the big boys and girls and media sycophants.
We are comfortable with our cash and continue to look for opportunities to
lighten our exposure.
Until next week “let the good times roll.”
13 February 2015
My brother, Jody Mathews, who was also
our webmaster, passed away two weeks ago. He died of heart failure at the age of 61. He is and will be always missed.
His passing is the reason there have
been no recent posts. Luckily, we have located a webmaster in Wisconsin who has assumed Jody's duties.
Recently we were audited by the State of
Wisconsin, and for the umpteenth audit by various regulatory authorities, questions were raised about whether the composition
of the Model Portfolio represented the activity in all accounts we manage. In order to eliminate questioning in future
regulatory audits (we are too old to deal with them) we will no longer present the Model Portfolio. Over 31 years The
Model grew from $50,000 to $773,000. That is a compound rate of return of 9.23%.
We will continue to mention the stocks we
own in our managed accounts in our weekly comment as well the activity in those stocks as we have always done.
During our posting absence we moved a good
deal of money to cash eliminating positions in Juniper, American Eagle, General Motors common twice and warrants once,
Verizon, AT&T, and Sprint. All the trades were profitable except the Sprint which was profitable for some and not so much
We also swapped our GM warrants for GM common
and the sold the common at a quick 5% gain when the shares rallied on news that a hedge fund groupie was going to try and get
a seat on the GM Board to cause GM to spend half of its cash hoard of $29 billion to buy back stock.
Auto companies spending the cash cushion they
accumulate in good times on buybacks or diversification (see Ford in the early part of this century as an example) is nuts.
We will watch to see what GM says - hopefully -"Take a Hike"- before reentering the issue. Our guess is that GM will reject
the suggestion and the share price will pull back as speculators exit.
After selling GM we did repurchase AT&T as we
continue our process of the last few years of trading AT&T for small gains that over time well exceed the market move of the
shares and the dividend yield. Several times we have also been able to capture the dividend.
We raised cash because we were surprised by
the late January sell off, and with accounts back to and in many cases above their year-end values, and markets at all-time
highs, we think moving to the sidelines is prudent.
Stocks we continue to hold are: Abercrombie
(ugh), Alcoa, AT&T, Bank America, DreamWorks, Fifth Third Banks, Huntington Banks, Marathon Oil, and Old Second Bank.
Most large accounts are less than 40% invested
with smaller accounts a bit more.
Happy Valentine Day.
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