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
22 May and 29 May 2015
We are heading out to visit Katie who is in the middle of her 2500 mile bike marathon from Florida to Maine. We also will be attending our 50th College reunion at Georgetown. Hard to believe all our friends are that old. As a result the next post will be June 5.
During the week we halved our positions in Abercrombie and Sprouts. We sold the Abercrombie because last quarter the reaction to disappointing results caused the share price to drop $6. Hopefully that won't happen this time but we would rather have some space to add. Also for taxable accounts the sale sets up a wonderful loss to go against profits taken.
We sold the Sprouts because we were back to near break even after purchasing shares on the earnings report drop a few weeks ago. The position in accounts is now more comfortable.
We also sold AT&T and NVDIA for scratch profits to get a bit more cash in accounts after purchasing Urban Outfitters down $8 on what we thought were fine numbers but which the big boys and girls obviously didn't like.
We currently own Abercrombie, Alcoa, GM, GM B warrants, The Gap, Marathon, Old Second Bank, Sprint, Sprouts, and Whole Foods. We sleep well with them.
Until next time, keep the faith.
Wonder if this works for Bear Markets:
Like black bears in the US, Eurasian brown bears avoid humans and rarely attack unless provoked or startled, which this one probably was. There have only been two fatal attacks in Sweden in the past century.
Experts recommend using the same tactics to avoid encounters with both species: Make yourself big, speak loudly, and never run away.
(Be warned though: If you run into a grizzly bear in the US, this approach might not work.) Oops. J
Read more: https://www.thedodo.com/man-stops-bear-attack-1150736598.html#ixzz3amrzeBIx
14 May 2015
Ahead of earnings we sold JC Penney for a scratch. Earnings and revenues were better than but not good enough and the shares sold off. We are not interested- for now. The Gap disappointed and dropped 10% and we added shares to accounts. The ladies Lemley, Bezold, and Lemley-Wood feel that Gap is back and for that reason we are willing to add shares. They have never been wrong on The Gap.
Markets continue to meander higher. Every other day the TV gurus suggest bond yields will rise and decimate stocks and then the next day the TV gurus say never mind. Smaller accounts are more fully invested than larger but we are reacting to stock prices and not the overall market. It is the time of year when such actions can lead to sorrow but what we own is not overpriced and we have our fingers above the button.
Below are two opinions that we share:
Morgan Stanley's Vincent Sinisi and Andrew Ruben think it is. They explain why they're still bullish on Sprouts Farmers Market (SFM) despite its rotten earnings:
Produce fluctuations and macro issues caused an unexpected 1Q comp slowdown, but we believe the worst is already behind us. Sprouts Farmers Market called out produce tightness, produce deflation, and poor weather as factors negatively impacting 1Q comps, each by ~50 to >100bps. Comps of 4.8% were below 5- 6% guidance, which did not account for deflation and weather issues. We understand the produce supply and pricing have been normalizing into 2Q, already translating into increased traffic growth. While not immune to fluctuations with produce as 25% of the business, we think SFM is well positioned to manage through changing environments, particularly with its supplier relationships. We note overall inflation is now expected at 1-2% for 2015, down from prior expectations for 2-3%. Despite questions on overall natural / organic growth potential amid recent ebbs and flows, we remain confident in the long-term outlook for this fastest growing segment of food retail, with early stages and a long tail effect.
Barclays' Meredith Adler isn't worried about competition from Whole Foods Market (WFM):
Whole Foods Market' recent commentary indicated that the threat it poses to SFM is not going to increase, since its management believes that the current brand does not and should not represent value. When Sprout's management was asked about the proposed new Whole Foods Market format, they prudently said they do not have enough information, but also that it did not believe it was possible to operate two formats with vastly different prices unless the product offering was completely different. It also stressed that Sprouts Farmers Market has a clear strategy, tons of experience, and the ability to adapt and evolve its concept in order to continually please customers. Sprouts Farmers Market stock has moved down sharply and therefore in our view represents a great value given its very attractive growth opportunity. We are maintaining our Overweight rating but lowering our price target to $40 from $42.
Shares of Sprouts Farmers Market have plunged 9.3% to $27.41, while Whole Foods Market has fallen 1.5% to $42.40.
In case you were wondering. We weren't but now we are in wonder of the markup.
Wal-Mart gets its bottled water from drought-ridden California.
The company sources the water for its "Great Value" brand from Sacramento's municipal water supply, according to labeling on the gallon jugs, CBS Sacramento reports.
"Sacramento sells water to a bottler, DS Services of America, at 99 cents for every 748 gallons — the same rate as other commercial and residential customers," according to the report. "That water is then bottled and sold at Wal-Mart for 88 cents per gallon, meaning that $1 of water from Sacramento turns into $658.24 for Wal-Mart and DS Services."
Read more: http://www.businessinsider.com/wal-mart-gets-water-from-california-2015-5#ixzz3ZxHQ7coO
We all have problems- some greater some lesser:
The Masters of the Universe — who usually shuttle by helicopter between the Hamptons and Manhattan — will make a desperate plea Thursday for a temporary restraining order to prevent restrictions from going into effect at the East Hampton Airport.
Helicopters will be limited to one flight a week to or from the East Hampton Airport under new rules imposed after a three-year campaign by neighbors infuriated by the nonstop noise. But chopper fans are having a meltdown.
The biggest impact will be on billionaire Ira Rennert, who owns two choppers: a Sikorsky S-92 that can seat 19 people and a Sikorsky S-76 that can seat 12.
"Rennert runs them both as a shuttle, back and forth every day," Frank Dalene, head of Quiet Skies Coalition, told me.
Goldman Sachs chief Lloyd Blankfein, art dealer Larry Gagosian and Jets owner Woody Johnson are said to be other frequent fliers.
It was reported that "Today" show host Matt Lauer, who has a 40-acre horse farm in Water Mill, regularly choppers into Rockefeller Center, but network sources said he doesn't use helicopters any more than ABC's George Stephanopoulos, who had a house in East Hampton for several years, used to. "Matt drives," said an insider.
"It's high noon on Thursday," said one aviation supporter. "If we don't get the TRO it will be chaos."
The restrictions are expected to push more traffic to the helipad in Southampton on Meadow Lane, near Calvin Klein's house.
"It will be like 'Apocalypse Now,'" said one Hamptonite. "But it's not the end of the world. Seaplanes can still land in East Hampton. Everybody will be taken care of. It's rich people's problems."
8 May 2015
The Monthly Employment report was better than and the news reversed the markets' doldrums of this week for Friday at least. This week we reacted to earnings news and repurchased some issues we have been trading for the past few years. AT&T, Marathon, Sprint, and Whole Foods all disappointed and we used the subsequent price corrections to add to accounts.
Sprout Foods had what we considered a good report but it too disappointed and with the drop in Whole Foods a compounding fact SFM dropped 20%. Insiders who sold 15 million shares in March at $34.75 must be feeling pretty good. We wonder if they knew something.☺ We added shares to our positions on the drop deciding to tough it out since we have traded the shares profitably in the past year.
We sold PG at a scratch loss to offset these purchases a bit.
Until next week, keep the Faith,
One reason we don't own drug stocks is for the way the profit motive interferes with the healing motive with the profit motive always winning. Originally the government developed drugs but mid last century business got the idea that there was gold in them thar hills. The government still spends tons of money identifying and developing drugs and therapies through university grant and NIH. We can't fight City Hall but we do tend to avoid it.
This story illustrates:
Alexion Pharmaceuticals Inc. agreed to buy Synageva BioPharma Corp. in a cash-and-stock deal valued at $8.4 billion, paying more than double the market cap for the maker of rare-disease treatments.
Alexion said Wednesday that following the Synageva deal, it could have three therapies serving patients with four rare diseases on the market by the end of the year.
The acquisition's hefty premium represents the interest in rare-disease treatments, which are attractive to companies because they typically can charge relatively higher prices for focusing on treatments aimed at smaller populations. Plus, the treatments receive multiyear periods of exclusivity in the U.S. and Europe.
Alexion's other major drug, Soliris, treats two genetic and life-threatening blood conditions affecting several thousand patients world-wide. The drug costs roughly $450,000 a year and has helped to propel Alexion to a nearly $34 billion market capitalization, before Wednesday. Soliris sales totaled $600.3 million over the first three months of the year.
May Day 2015
Workers of the world unite; you have nothing to lose but your chains. Or in
Wisconsin your unions.
Markets had the blahs this last week of April and continued the up/down
activity of the whole year. Conviction lags as bulls and bears seemed more
interested in their bets on the NFL draft and tomorrows Kentucky Derby and
Pacquiao/ Mayweather fight.
This week did have some decent pullbacks in concept stocks that disappointed
but on the whole markets seem content with the current level without feeling
the need to move higher or lower.
Spring is finally here for good and moving and planting have begun. Enjoy.
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