Lemley Yarling Management Co
309 W Johnson Street
Madison, WI 53703
Comments on activity in client accounts
31 January 2020
Markets were weaker this week as the unknowns of the new virus caused the inexorable grind higher in market indexes and averages to slow.
We tried to trade Monday's down by buying GM since we thought the markets would rally on Tuesday (they did). Unfortunately, value stocks only rally over year end and so we sold for a scratch loss when we again realized that the millennials who run big money only believe in Tesla (up 50% in January alone) and not in any ordinary car companies priced at 7 x earnings with 5% dividends. The mantra is to buy Tesla because of their China production and to sell GM because of their China production. And so, it goes.
We also traded XOP for a scratch profit and then sold half our Marathon for a 10% loss. Oil is about as popular as the Coronavirus.
Our ViacomCBS and Sprouts holdings are down but not out. We did buy AT&T back at or below our sell price as T reported OK earnings; and we hold a now small position in Marathon Oil.
Accounts are 70% cash and will be that way for a while.
On to February and Spring.
24 January 2020
Markets continued moseying higher till Friday when the coronavirus scare led to a slight pullback. During the week we switched XOP to Marathon Oil to be a bit more aggressive on oil.
Almost all accounts are 70% or more cash or invested in USFR- the Wisdom Tree 8 day Reset Treasury ETF.
And so, it goes.
17 January 2020
The last four years if we had taken our year end bounce profits and moved to the sidelines until the following November our accounts and our psyche would have been rewarded. Unfortunately, we thought we were smarter than Mr. Market and tried to trade our value under pressure stocks during the year and so spent most of our time with egg on our face until our year end purchases rescued satisfactory returns.
In 2019 our accounts were able to recover from our midyear folly and earn 20% plus returns in most accounts. This year we are moving to the sideline in January and hopefully planning on watching. Markets are overvalued and the Trumpster in an election year may be too unpredictable. His need to command the news every day with his reality show coupled with sky high p/e ratios or no earnings in many of the issues leading the markets higher suggest that a least a 10% correction should be expected in the coming months.
This week we Rang the Bell on our accounts year-end rally and reduced positions to three issues. We are holding ViacomCBS which is priced at 6 times earnings, XOP for an oil trade on any more mid-east adventures and Sprouts Food Markets because it has rallied 30% from this level every year for the past 5.
During the week we profitably eliminated Cisco; and AT&T which we have traded successfully for the last year to wait for earnings at the end of the month. Most of the gurus remain in a SHOW Me frame of mind regarding the Time Warner acquisition and we are looking for a lower reentry point on any disappointment.
We also sold Walgreen Boots when it failed to rally after year end. For the first time in forever we don't own any retail having taken small profits or scratches on our issues in the last two weeks. We abandoned our attempt to extend our last year profits in Michael's remembering our very unprofitable sojourn in Ascena last year when we thought we were smarter than Mr. Market. We are interested in Urban Outfitters and Abercrombie but we will await earnings results in February and March before revisiting.
Finally, we sold, quickly revisited, and then just as quickly sold Nokia when we realized that we should be content with our 15%-year end rebound profit which was all we were seeking when we bought in December.
And so, the clock hands turn in what should be an interesting year.
10 January 2020
During the week in response to the Trumpster's foreign adventure we decided to raise cash and repurpose a few of the dollars in more staid investments. And so, we took a 10% gain in Abercrombie, a couple of plus scratches in The Gap and Macy's, another sale of United Natural Foods (too much debt) for a plus scratch, a 15% profit in Nokia, a scratch loss in Shake Shack and Box and eliminated Ascena from our accounts and our mind.
We sold Beyond Meat on Wednesday for a nice profit but after it broke out on the upside on Friday, we repurchased higher. It is our only speculative issue. Its price action reminds of Roku last year and we are going to give it more room – since we have a realized profit- to move up and down. It is a favorite of day traders and since it doesn't earn any money it trades on sentiment and technical price movements.
We sold Walgreens Boots on Monday ahead of earnings for a scratch and bought it back on Wednesday after it dropped $3.50 a share on disappointing earnings. The shares yield 3% and are in the doghouse right now but there is value here. We have been trading unprofitably for the last year after trading very profitable a few years ago. Hopefully (not an investment strategy) we will have better luck this year.
We sold and then repurchased Cisco and AT&T after the tensions in the Middle East subsided. Most accounts are 50% to 70% cash which is a more comfortable feeling given the Trumpeter's mindset and the new highs being made every day.
We know this is a lot of activity in accounts but we don't intend to give late years hard earned gains back and the political and international situations are unstable with our resident president not helping the situation. The markets have so far relished/ignored him and the temporary settling of the Iran situation is a positive- at least in the short term. Either Iran was as scared of trump's incautious actions as we were and/or Saudi Arabia and best friend Putin were able to calm the situation that would have benefited no one. Whatever we have no doubt the more and different chaos yet to come.
We currently AT&T, Walgreen Boots, Cisco, ViacomCBS, Sprouts Food Markets, American Eagle Outfitters and Michael's Stores.
Until next time, stay warm and dry.
3 January 2020
We closed the year on a positive note in our accounts. Most accounts were up 20% to 30% on the year which was excellent given that we were 50% or more cash for much of the year. We had some problem stocks during the year but all's well that ends well.
Last Thursday we sold Michael's when it popped 20% in an hour on news that the company had hired a merchandiser from Walmart as its CEO. We thought the rapid rise was the result of short covering and -since we had a very oversized holding in accounts- we sold. After the action settled down on Friday, we repurchased in much smaller amounts. With the sales and repurchases we ended the year positive in our Michael's trades and look forward to good results this year.
In the last two days we realized a 10% profit in United Natural Foods. As with Michael's we had an oversized position and with the terrible results we had last year in Ascena and Rite Aid we are leery of being smarter than Mr./Ms. Market.
Since we were fully invested at year end we also sold Tapestry for a profit and XOP and BP today on the Iran leader killing with less than enthusiastic pop in oil stocks.
We are adding a bit to Nokia what we think is a $5 stock but for the most part we are happy to replenish our cash position which we will be doing over the next month.
We now own: AT&T, Viacom CBS, Cisco, Walgreens Boots, Sprouts Foods, Box, Hewlett Packard Enterprises, Nokia, Beyond Meat, Shake Shack, and retailers, Abercrombie, American Eagle, Macy's, The Gap, Michael's and a much-reduced position in Ascena (Ann Taylor, Lane Bryant and Justice).
And so it goes.
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.
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