Lemley Yarling Management Co
309 W Johnson St
Madison, WI 53703
Comments on activity in client accounts
29 January 2022
We are heading to our country farmhouse next week so the next post will be February 11.
We bought the 1000 point drop on Monday; sold the 500 point rise on Wednesday and repurchased a few stocks on Friday in the morning before the 500 point rally into the close. We bought the Monday drop because the markets had been down daily for many days and the selling seemed overdone and providing a trading opportunity. But the action on Tuesday gave us pause and the rally Wednesday AM provided and opportunity to exit our trades with a 5% and more gain.
Our accounts are positive 4% to 10% for the year while the major averages are lower with the NASDAQ down 13% and the DJIA down 5% and S&P 500 off 7%.
We sold our Gap position at a loss to reduce retail exposure. We may return next month before earnings. We sold Intel before earnings for a scratch profit and then purchased after its earnings report 10% lower. Since good earnings were not being rewarded by the markets this week, we also sold Western Digital before earnings for a scratch profit and repurchased 15% lower the next day.
We continue to trade around our core holdings in GM and Ford and have been in and out of Apache and the XLE (Domestic Oil ETF) as the situation in Ukraine/Russia dictates. Our trading in them and Phillips 66 has been profitable. We established a position in Huntington Bank when it sold off 10% on decent earnings and also added to Energizer Holdings and reentered Gilead lower than we sold for a profit earlier this month. We exited ViacomCBS and AMC Networks for our second trading profit of the month. We did reestablish a position in AT&T which is close to spinning of Warner and also continue to trade in and out of Verizon.
We currently own Boeing (no earnings), Best Buy (3% yield, 9X earns)) and Gilead (4%, 8X) for trades. We own XLE (3%) and Apache (1%, 8X) for oil exposure vis a vis Ukraine. We have Ford (8x) and GM (8X) and Verizon (4%, 9X) and AT&T (8%, 8X) as trading/hold issues. Pinnacle West, the Arizona utility has a 4% dividend and Intel (3.5%, 12X) and Western Digital (7X) give us chip exposure in two low p/e out of favor dirt cheap companies. Energizer Holding (3%, 11X)- the bunny people- report earnings this week as does Gilead so it should be interesting. Hopefully markets will be in a more positive mood. We have been trading Carpenter Steel (loss, 2.5%) for the past 2 years and Huntington Bank (10X, 4% yield) is our financial exposure. Our retail holdings are more reasonable with Macy's (2,3%, 5X), American Eagle (3.25, 10X) and Bed Bath (loss). And Portillo (breakeven) is our underwater Hot Dog investment.
Cash is 30% and greater in many accounts. we are trusting that a rally will give us and opportunity to reduce equity and raise cash.
Hope, though not an investment thesis, springs eternal.
21 January 2022
Last week we were congratulating ourselves on our perspicacity for buying tax loss issues before year end and watching them jump 10% to 20% in the New Year. As sometimes occurs, Mr. Market brought us and the markets back to earth this week as the threat of higher interest rates from a Fed tightening, the continuing retrenchment of the crazy stocks and the Russia/Ukraine imbroglio caused serious selling. And the computers had a heavy hand in the downturn in the last hours Thursday and Friday as buyers moved to the sidelines in the face of the selling onslaught.
Happily, and luckily, we didn't like the market action on Tuesday morning and began selling our winners and continued to do so on Wednesday. On Thursday when the markets rallied 1% and more in the morning (only to close 1% lower), we reduced by half our losing positions in our retail stocks- at too large losses- and also reduced our Ford holdings.
And so, by Friday most large accounts were 50% to 70% cash. We have maintained reduced positions in American Eagle, The Gap, Macy's and Bed Bath. We did trade Abercrombie for a plus scratch and Nordstrom for a negative scratch during the week. Our retail holdings entering the New Year were oversized. We expected a recovery in them from year-end tax loss selling- which did occur – but then the general sell-off in the markets inevitably affected our retailers
On Friday we did repurchase the Domestic Oil ETF and Apache Oil. We bought them because we think Putin is megalomaniac enough to invade Ukraine since he knows the NATO response will be sanctions and not all out war.
An invasion is an occurrence that can cause further pressure on stocks. The 33% 2 week drop in Bitcoin's Value threatens the store of value thesis and may be having an effect on stocks as margined speculators in the Bitcoin realm have to sell stocks to raise cash for margin calls.
All in all, it's been an interesting beginning to the New Year. We can do without the drama but Mr. Market is in control. We are only observers.
14 January 2022
The NASDAQ was under pressure all week but luckily our out of favor stocks managed to rally until Friday's sell off mitigated our gains for the week.
We used the rally in our issues to reduce oversized positions in ViacomCBS and AMC Networks. Both were up 20% since year end and we had loaded up at year end expecting the rebound. We like both companies but prudence suggested reducing our holdings. We also sold part of our Gap holding for the same reason.
We continue to consolidate our holdings taking profits in GM, Intel, Pinnacle West, Carpenter, and IBM and a loss in First Solar, ChargePoint, QuantumScape, Pinterest and Snap. (Mr. Market doesn't like high price to sales /no earnings stocks these days). Trades the past two weeks as we reduced holdings realized a net profit in accounts.
We added to AT&T and Verizon shares in accounts for their yield and low beta. Also, the Time Warner spinoff to Discovery is nearing and AT&T has been moving higher as year-end tax loss selling abated and as Discovery has been rising in price this month.
We repurchased Ford as its market value surpassed $100 billion- still $900 billion less than the value of Tesla while selling 5 times as many autos.
We have maintained our Retail holdings in Macy's, The Gap, American Eagle and Bed Bath; and we have continued to trade Urban Outfitters and Abercrombie for 5% to 10% profits.
We reduced our Canadian Solar position at a loss but maintained and added to our solar ETF (TAN) holding as a diversified but volatile means for solar exposure.
We own the cloud ETF (CLOU), Activision, Western Digital and Portillo's in several accounts for trades.
Summer is on the way!!
Virtual Real Estate – Crazy!!
It's no secret the real estate market is skyrocketing, but the Covid pandemic is creating another little-known land rush. Indeed, some investors are paying millions for plots of land — not in New York or Beverly Hills. In fact, the plots do not physically exist here on Earth.
Rather, the land is located online, in a set of virtual worlds that tech insiders have dubbed the metaverse. Prices for plots have soared as much as 500% in the last few months ever since Facebook announced it was going all-in on virtual reality, even changing its corporate name to Meta Platforms.
"The metaverse is the next iteration of social media," said Andrew Kiguel, CEO of Toronto-based Tokens.com, which invests in metaverse real estate and non fungible token-related digital assets.
An NFT collection of 10,000 Wall Street bulls sold out in 32 minutes, and soon risk-hungry collectors can double down or lose it all through a new gamification feature
As cryptocurrencies are mired in bearish sentiment, NFTs are bucking the trend amid broad adoption.
NFT-backed loans, which allow holders to use their NFTs as collateral, have become more popular too.
Arcade's Gabe Frank shares the steps for borrowing against your NFTs and how traders use the loans.
But non-fungible tokens, which were once called a digital fad, have continued to gain momentum on the back of rising sales volume and mainstream adoption. In 2021, the market size of NFTs ballooned to $41 billion in value, compared with about $50 billion in sales in the traditional art market in 2020.
The breakneck growth of NFTs has seen no signs of slowing in 2022. OpenSea, the largest NFT marketplace, this week raised $300 million in a Series C funding round that drove its valuation up 800% to $13.3 billion from $1.5 billion in July 2021. Electronics giant Samsung said it will integrate an NFT platform into its smart TVs later this year. Most recently, the Wall Street Journal reported that GameStop is launching an NFT unit and has hired 20 people for it.
Meanwhile, prices for some of the so-called rare or blue-chip NFTs continue to soar, with a recent Mega Mutant Serum NFT being sold for $5.8 million.
As the boom in digital collectibles continues, some investors and entrepreneurs have found a new way to extract the maximum value out of their NFT holdings — by using them as collateral for loans.
NFT-backed loans solve the problem that most digital collectibles are illiquid despite their rapid appreciation in value, according to Gabe Frank, the co-founder of decentralized NFT lending marketplace Arcade.
"We've always seen NFTs as a new asset class," he said in an interview. "And to be a new asset class, you need to have credit markets."
How to take out loans against your NFTs
Crypto users take out NFT-backed loans for various reasons. Some use the money to scoop up more undervalued NFTs, others engage in a decentralized finance strategy called yield farming, which could generate potentially higher returns than the interests on the loans, according to Frank.
7 January 2022
Mr. Market has been good to us so far this year. We have been able to sell several of our tax loss fancy stocks at nice profits and redirect the funds to more conservative issues.
We sold a large chunk of Bed Bath for losses before and after earnings but we kept a position because we still believe in its longer-term prospects. We just didn't want to keep the oversized position and happily we made enough money in the shares last year to well cover any losses incurred.
We also took a short profit in Nordstrom to concentrate on Abercrombie, American Eagle, The Gap and Macy's. AEO, GPS and Macy's all yield over 2.5% and we expect earnings and sales to meet expectations for the 4th quarter.
We now own AT&T, Verizon, IBM, Dow, Merck, Bristol Myers, Gilead, Pfizer, Pinnacle West, Citigroup, Intel, Campbell Soup and Kraft Heinz. These are our core positions for the year until we decide to raise cash. We have been- in-out- and in -on several of these issues as we adjusted portfolios but now plan on staying long them until we decide the Mr. Market is too frothy for even holding these issues.
Our positions in AMC Networks and Viacom CBS are now profitable - as we expected - after tax loss selling and year end window dressing abated in the new year. We are expecting another 25% move higher in each before we begin reducing the oversize positions.
And we own Pinterest, Snap, Canadian Solar, First Solar, Beyond Meat and the solar ETF (TAN) as 'fallen fancy stocks' that have earnings and interesting stories. We won't hesitate to take profits.
Finally, we own Portillo's and ARKK to trade. We have had luck with Portillo's but ARKK -not so much.
And the beat goes on for the Store of Value:
The price of bitcoin fell below the $41,000 mark on Friday, reaching its lowest level since Sept. 29, according to data from Coin Metrics.
Hawkish comments from the Federal Reserve this week triggered a sell-off in global stock markets which spilled over into cryptocurrencies.
An internet shutdown in Kazakhstan, the world's second-largest bitcoin mining hub, is also weighing on crypto prices.
And from November:
The world's fastest-growing major financial exchange has no head office or formal address, lacks licenses in countries where it operates and has a chief executive who until recently wouldn't answer questions about his location.
The sheep spends its life worried about Coyotes, only to be eaten by the farmer.
Comments on activity archives
FAIR USE NOTICE
This site contains copyrighted material the use of which has not always been specifically
authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental,
political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any
such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107,
the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for
research and educational purposes. For more information go to:
http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use
copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.
Check the background of this firm at https://brokercheck.finra.org/
For Information on RBC LLC SIPC and Excess SIPC protection https://www.rbcwm-usa.com/legal/rbc-cs/cid-319579.html.
For those clients of LY & Co and other
interested persons the Quarterly Report on the routing of customer orders under
All SEC Rule11Ac1-6 Quarterly reports up to March 2, 2012 may be found by visiting
the diclosures at LY& Co Clearing Broker Mesirow Financial
From March 2, 2012 forward all
SEC Rule11Ac1-6 Quarterly reports may be found by visiting the website
Annual offer to present clients of Lemley Yarling Management Co. Under Rule 204-3 of the SEC Advisors Act, we are pleased to offer to send to you
our updated Form ADV, Part II for your perusal. If any present client would like a copy, please don't hesitate to write, e-mail, or call us.
A list of all recommendations made by Lemley Yarling Management Co for the preceding one-year period is available upon request.
Business Continuity Plan