Lemley Yarling Management Co
309 W Johnson Street
Madison, WI 53703
Comments on activity in client accounts
Washington's Birthday 2019
Markets meandered this week and we spent the time buying quality companies that missed.
CVS, the drugstore company, dropped 10% on an earnings miss and our purchase makes a nice companion to our Walgreen Boots position. These two major drugstore chains are taking a different approach to the future with CVS buying Aetna Insurance in 2018 while WBA has chosen a more traditional path.
We also tepidly purchased Kraft Heinz in small amounts in many accounts as it crashed 20% (to $35 down from $90 a few years ago). Warren Buffet owns 350 million shares (26%) of the company and a Brazilian Company 3G owns 22%. Should be an interesting next few months with this stock.
We abandoned Activision (sorry Aby and Tyler) when it zagged instead of zigging. Some trades don't work. We lost 5% on the trade.
We added Southwest Airlines when it dropped $3 on a Goldman downgrade. We traded the company in January for a nice profit at slightly lower prices. It is the only airline that has more cash on hand the debt.
We also repurchased Baker Hughes (which we also traded for a scratch profit at lower prices) in January. BHGE announced improved earnings and revenue and we decided to hop back on. GE wants to sell the position and we think the shares with the good earnings can (magically) climb back into the $30s before GE sells.
Markets are awaiting the conclusion of the China trade talks at which time the Trumpster will declare victory no matter what the outcome.
We have re-ordered portfolios into quality companies having temporary (we hope) issues. Time will tell.
W currently own:
AT&T, Walgreen Boots, CVS, Coke, Twitter, Southwest Air, Newell Cos, Kraft Heinz, Hain Celestial, Teva Pharmaceutical, Marathon Oil, Baker Hughes, GE, Ford, Avon and Ascena.
8 February 2019
As we watched Amazon and Google move lower during the week (they have been market leaders for the past 15 months) and because of the substantial recovery in our accounts since year end we decided to raise cash. We also recalled that our accounts had risen smartly in early 2017 and 2018. Those two years we remained invested to our ultimate dismay.
We decided that this third time we would vary our actions by taking a large chunk of money off the table. And so beginning on Wednesday we took profits and a few scratch losses to get many accounts to 50 % cash. We also have an oversize position in accounts in AT&T which yields over 6%. The 6% dividend gives us $2 downside protection over a year.
We will continue to trade earnings misses in quality stocks such as Intel and retail stocks as they report this month, but for now we plan to remain on the sidelines.
We currently own: AT&T, Walgreens Boots, Under Armour, Hain Celestial (which reported bum earnings and dropped 10% this week) Marathon Oil (our sole oil stock), and normalized holdings in GE and Ford.
We are watching: Teva Pharmaceutical, Coty (in which we realized a nice profit this week, United Natural Foods, Bristol Myers Intel, IBM, Viacom and others.
Hain Celestial, Ugh!! : https://finance.yahoo.com/news/hain-celestials-hain-q2-earnings-140002380.html
Coty, good earnings and also a nice profit on short covering bounce.
United Natural Foods Sues Goldman Sachs for Not Disclosing That It Would Behave Like Goldman Sachs
Speaking of taking advantage:
So now the institutional investors are encouraging the hedge funds to take more risk to beat the market since the hedge fund managers won't earn anything if they don't. Go figure
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