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Lemley Yarling Management Co
309 W Johnson Street
Apt 544
Madison, WI 53703
Bud: 312-925-5248       Kathy: 630-323-8422

Comments on activity in client accounts

29 July 2016

Oil didn't bounce at $45 as we thought it would and is now at $40 down 20% from its high of $50. So our initial buys at $45 of MRO, BP and XOP are slightly underwater but not abandoned. We did take a loss on part of MRO and placed the money in Devon and Marathon Petroleum for a bit more diversification within the industry.

During the week we added Skechers, the shoe folks, when the stock dropped 20% on less than earnings, it is down 50% from its high and priced at one times revenues while Nike sells at three times and Adidas is priced at two times.

Twitter also dropped 20% on a disappointing report and we bought a reasonable amount for a trade/hold. Finally we added Sprouts Food Markets when Goldman upgraded to a buy. Goldman put a sell on it in May before less than earnings and a big price drop. Goldman banished Whole Foods from its buy list on Tuesday at the same time it was upgrading SFM. Two days later Whole Foods delivered less than and dropped 10%. SFM announces on August 4 and we are betting on Goldman being right for the third time. if not we have room to add more.

Even with these purchases we remain 70% or more cash in large accounts and 50% and more in smaller.

As we enter the dog days of summer (dog days: the sultry part of the summer, supposed to occur during the period that Sirius, the Dog Star, rises at the same time as the sun: now often reckoned from July 3 to August 11. a period marked by lethargy, inactivity, or indolence), we expect markets to mender awaiting some event to move them up/down.


Shares of Sprouts Farmers Market are advancing 1.83% to $23.88 this morning after Goldman Sachs upgraded the stock to "buy" from "sell".

The firm maintained its price target on the Phoenix-based grocery store at $29, saying it is a disruptive company in the grocery market, providing an affordable, healthy alternative, TheFly reports.

Goldman analysts expect the company to benefit from the continued focus on wellness given its natural, "farmers market" style, according to TheFly.

Sprouts Farmers Market is slated to report fiscal 2016 second quarter results next week. Analysts project the company will post earnings of 25 cents per share on revenue of $1.05 billion.



Shares of Skechers USA Inc. plunged Friday after the footwear maker reported a fall in second-quarter profits despite recording sales growth. Manhattan Beach-based Skechers (NYSE: SKX) reported earnings of $74.1 million, or 48 cents per share, for its quarter ended June 30, down from $79.8 million, or 52 cents per share, in the year-ago period. The company blamed foreign currency exchange rates and higher general and administrative expenses for the decline. Sales rose 9.7 percent to $877.8 million from $800.5 million, lifted by growth in its international subsidiary and joint venture businesses. However, its domestic wholesale business were hurt by shipments being pulled from April into March.



Disappointing earnings revive speculation on Twitter's future

SAN FRANCISCO (Reuters) - Twitter Inc disappointed investors yet again on Tuesday with second-quarter earnings that missed estimates and a lower-than-expected outlook, reviving chatter about a possible sale of the company and the future of Chief Executive Officer Jack Dorsey.

With the stock falling almost 15 percent Wednesday, Twitter shares are down 50 percent since Dorsey returned last summer to the helm of the social media company he co-founded.

Twitter continues to show almost no growth in its user base of a little over 300 million, an ominous sign, and advertising revenues are showing surprising softness; the company cuts its forward revenue estimate for the next quarter to $590 million- $610 million, while analysts had been expecting $681 million.

At a market cap of about $11 billon, compared with more than $40 billion at its peak, Twitter could now be a more attractive takeover target. CNBC commentator Jim Cramer, for one, suggested that Twitter could be rolled into the combined Yahoo-AOL.

Verizon, which owns AOL, this week said it would buy Yahoo for $4.8 billion. Google, Disney and Apple have also been mentioned as possible acquirers of Twitter over the years.

Twitter surged briefly earlier this month after Microsoft announced its acquisition of LinkedIn, as investors hoped for a similar deal for Twitter.

Still, a person close to the board said it was highly unlikely that there would be any move to oust Dorsey or actively seek a sale of the company anytime soon. Dorsey also serves as CEO of payment company Square, a dual role that many have questioned.

The live-streaming video deals with the major sports leagues that Dorsey and his executive team touted in an investor call Tuesday could add to the company's appeal, said James Cakmak, analyst at Monness, Crespi, Hardt & Co.

"The good news is these content deals could potentially make (Twitter) a more attractive acquisition target for a media company looking to expand digital distribution," he said.

Twitter has struggled to translate its high public profile into the kind of user growth that has propelled Facebook, which now boasts 1.71 billion customers. The company has also suffered from management turmoil since its earliest days; former CEO Dick Costolo, who was credited with quickly building the company's advertising operations, resigned under pressure last June.

Twitter's board of directors has been reconstituted under Dorsey, with the addition of former Google executive Omid Kordestani as executive chairman and new members including former Facebook CTO Bret Taylor, U.K. internet entrepreneur Martha Lane Fox and BET Networks chair Debra Lee.

Dorsey outlined a turnaround plan earlier this year to focus on five areas: Twitter's core service, live-streaming video, nurturing the site's "creators and influencers," creating an environment in which users feel safe and building better relations with third-party developers.

Some analysts say Dorsey needs more time to reap the benefits of his turnaround plan, but patience is waning.

Robert Peck, analyst at SunTrust, pointed to several big concerns: lack of any uptick in user numbers or engagement, faltering ad sales, and questions about the company's competitiveness in live video given rival initiatives by Facebook and Alphabet Inc's YouTube.

When analysts asked Dorsey on Tuesday the value in remaining an independent company, he said that "there's so much farther for us to go" as a company and business of importance.

"I have a lot of confidence in our ability and that our five priorities are the right ones," he said.



22 July 2016

Markets continued to meander higher this week as many earnings reports beat lowered expectations. And even when reports missed the action in the shares of those companies was muted to the downside. Jim Cramer, who is this generations Eliot Janeway (http://www.nytimes.com/1993/02/09/nyregion/eliot-janeway-economist-and-author-dies-at-80.html ) Dan Dorfman (http://www.nytimes.com/2012/06/20/business/media/dan-dorfman-82-dies-his-tips-moved-markets.html ) believes that with the improved earnings reports and outlook the markets may avoid a scary correction and continue to move on to new highs.

With the S&P 500 at all time highs and priced at 20 times earnings that is a tall order to fill. We would rather err on the side of caution- especially with the January-March fiasco fresh in our in mind. We did add three oil issues; the XOP, Marathon Oil and British Petroleum to accounts when Oil dropped under $45 a barrel earlier this week. Oil stocks are pulling back less and testing recovery highs on up moves when the price pulls back to $45 and then recovers to $50. With the unrest in the Middle East and around the world we are willing to have exposure in oil. We are trading the oil stocks to earn better returns than holding 10 year Treasuries (1.5%) with less risk. Large accounts remain 85% or greater cash and small accounts are 60% and more cash.

Stay cool.


18 July 2016

We are back and all is well in La La land. The DJIA is up for the 8th straight day. We remain in cash. And life goes on.

A photo on our 50th wedding anniversary with the kids and grandkids:

The old stockbroker- who survived the Crash of 1929 but lost his fortune only to regain it in later years – believed that partnerships made the partners personally liable and that fact prevented the assumption of too much risk. In the good old days NYSE firms had to be partnerships and could not incorporate for that very reason.

From the NYT: Over the last few decades, Wall Street firms have transformed themselves from small private partnerships into the publicly financed behemoths that we know today. Along the way, they lost the old way of doing things, where the operating capital came from the partners, who faced the ultimate liability for anything that went wrong, including losing their entire fortunes.

Instead, the old partnership culture was transformed into a bonus culture where bankers, traders and executives have minimal accountability when things go wrong. Crises will continue to happen; Professor Goodhart predicted the next one would hit in 2025. But it is the creditors and shareholders who will pay, and pay dearly, for Wall Street's mistakes unless something changes. As the mantra of the 2008 financial crisis goes: The risks on Wall Street have been socialized while the profits have been privatized.

the entire article: http://www.nytimes.com/2016/07/08/business/dealbook/how-to-fix-wall-streets-flawed-system-of-compensation.html?&moduleDetail=section-news-0&action=click&contentCollection=DealBook®ion=Footer&module=MoreInSection&version=WhatsNext&contentID=WhatsNext&pgtype=article


6 July 2016

We are on vacation — our first in many years — to celebrate our 50th wedding anniversary with our family in northern Wisconsin. We will post a few thoughts on July 19 when we return and then have our regular post on the 22nd. Large accounts are 90% cash while smaller ones are 50% and more. We expect markets to meander through summer with a downward bias.

If you need anything Kathy is available at 630-399-4200


1 July 2016

We traded Devon and Marathon Petroleum last Friday through Tuesday for a plus scratch on Devon and a minus scratch on MPC. Given that we had a 10% loss in each on Monday morning we are satisfied with the outcome. We can't win them all but a near tie works for us.

One reason we sold both stocks on Tuesday is that we didn't like the rally. We would have considered staying in them if the markets had opened down 1% or more on Tuesday and then rallied in the afternoon. Instead they opened 1% higher and maintained that gain through the day. That type of action does not clear the seller's action and so we took some trades off the table. On Wednesday's rise we sold Deutsch Bank for $1 loss when it didn't rebound as the other issues had. We placed that money in BankAmerica which is moving with the markets and is a less controversial bank. We had purchased Deutsch Bank as a Brexit play but that didn't work. That's our second loss in the stock although this time not as bad as the last. On to other more favorable plays. We also sold Morgan Stanley for a scratch loss.

This week seems to be a situation where the hedgies who were the wrong way on Friday last decide to short Monday then panicked covered Tuesday when markets opened higher and refused to go down. On Wednesday markets again rallied as hedgies probably decided to go long.

We didn't trade it very well but that occurs sometimes. At least we broke even on our trades. The purpose of our trading it to try make a few dollars without risking a lot to earn better than the measly rates of return ( the ten year Treasury is a bit over 1.4% yearly). Last year and this year we have managed to succeed - except for the January through March roller coaster ride which none of us enjoyed. The returns of the 1990s and mid 2000s are fond memories and may remain so for a while. Meanwhile we trudge on enjoying the confidence of our clients.

We expect continued weakness through the rest of the summer.

Happy Fourth.




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309 W Johnson Street Apt 544 Madison, WI 53703 312-925-5248
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