Lemley Yarling Management Co
309 W Johnson St
Madison, WI 53703
Comments on activity in client accounts
26 May 2023
The NASDAQ was the star of the week as NVDIA gained 20% on its earnings report and the other Tech Titans went along for the ride. The S&P 500 was more muted but the large cap tech stocks helped it to be positive for the week while the staid old real company DJIA was lower although it participated in Friday's week closing rally.
Some of our retail stocks reported earnings this week with VF Corp and Kohl's reporting better than which led to a pop -then drop. We traded out of the Kohl's and repurchased lower 2 days later. We held the VFC and added when it settled back. The Gap reported better than but still bad, and we sold the pop for a plus/minus scratch in accounts. American Eagle dropped 15% on poor results and we added to positions. Macy's reports next Wednesday and Nordstrom Thursday.
We traded out of Verizon and AT&T for another scratch loss to have funds available should the debt ceiling calamity occur. Along with Walgreens the three are in the dog house with 7% dividends. That makes no sense but we can't argue with Mister Market and will hopefully find a reentry points lower.
On the NVIDIA pop Intel dropped and we repurchased the shares. We've been trading Intel with middling results since it was $50 (now ($28). We're thankful we are even on those trades and hopefully INTC has been punished enough. Also, as the NVDA and AMD scream higher the value of Intel becomes more interesting as Intel has revenues 2 times either and a markets cap much less. Eventually….
We added BioNTech to accounts this week. It is the German biotech that partnered with Pfizer for the covid vaccine. It is also working on a MRNA solution to pancreatic cancer which had very positive results in a small phase 1 trial. With $50 a share in cash and minimal debt, at $110 it seems a reasonable investment.
We are also back in Zoom after it reported inline earnings. Of the formerly fancy stocks it is cheap at $66 per share at 15X with $20 per share in cash and minimal debt.
We continue to trade around our reginal bank holdings; this week selling Truist on a pop and buying back lower.
We have a 50% and greater cash/Treasury ETF position in accounts.
We have said we were in a sell in May frame of mind but we are guessing on a debt ceiling resolution and a market pop that will suggest a move to a greater cash holding.
It's nice to be right sometimes. Who knew we were in the top 1%. Many accounts were positive in 2022. That performance is not surprising since our mantra has always been to survive down markets while seeking reasonable returns in up markets.
During the worst year for US stocks since 2008, Sissman's small-cap focused Private Capital Management Value Fund (VFPIX) emerged relatively unscathed. It fell by only 1.2%, while the S&P 500 tumbled by 19.4% and the small-cap heavy Russell 2000 lost over a fifth of its value.
That remarkable relative performance translated to a top-1% finish for the mutual fund.
Hosting Florida's governor, Ron DeSantis, in a Twitter audio event on Wednesday to announce his presidential run was supposed to be a triumphant moment for Elon Musk, the owner of Twitter.
Instead, the event began with more than 20 minutes of technical glitches, hot mic moments and drowned-out and half-said conversations before the livestream abruptly cut out. Minutes later, the livestream restarted as hundreds of thousands of listeners tried to tune in. Mr. DeSantis had not said a word at that point.
Finland was dealing with an unusual problem on Wednesday: clean electricity that was so abundant it sent energy prices into the negative.
While much of Europe was facing an energy crisis, the Nordic country reported that its spot energy prices dropped below zero before noon.
This meant that the average energy price for the day was "slightly" below zero, Jukka Ruusunen, the CEO of Finland's grid operator, Fingrid, told the Finnish public broadcaster Yle.
19 May 2023
Markets meandered higher this week but gave back some of the gain on Friday when the Repubs walked away from the debt ceiling talks for a hurried minute.
We used the week to add a group of small positions in under pressure issues that we have been trading the past few years while still maintaining a 70% fixed income positions in many accounts except the smallest.
Our thought is that if the debt ceiling is raised without a close down the markets will probably rally across the board. If the debt ceiling brouhaha becomes a crisis these stocks are already beaten down enough to hold and maybe add to. Our over large Treasury ETF and cash position should limit the downside.
We have added in varying amounts: Disney, Verizon, AT&T, Marathon Oil, the major Bank ETF, The Regional Bank ETF, US Bank, Truist Bank, Fifth Third Bank, Key Bank, Ford, Newell Cos, and a retail group- Footlocker (when it dropped 30% on Friday), Macy's, Nordstrom, Kohl's, VF Corp, The Gap, American Eagle, and Under Armour.
We re-established small positions in all with room to add in each on further declines.
We are at the end of May so we may be pushing our luck and we are assuming a bit of risk in the chance the Repubs can find a few folks with common sense. We know that's a stretch….
The Metaverse, Zuckerberg's tech obsession, is officially dead. ChatGPT killed it.
Why does nobody ever suffer any reputational hit from this stuff?
Companies' rush to get into the game led Wall Street investors, consultants, and analysts to try to one up each other's projections for the Metaverse's growth. The consulting firm Gartner claimed that 25% of people would spend at least one hour a day in the Metaverse by 2026. The Wall Street Journal said the Metaverse would change the way we work forever. The global consulting firm McKinsey predicted that the Metaverse could generate up to "$5 trillion in value," adding that around 95% of business leaders expected the Metaverse to "positively impact their industry" within five to 10 years. Not to be outdone, Citi put out a massive report that declared the Metaverse would be a $13 trillion opportunity.
5 May 2023
The S&P 500 traded flat on Monday, dropped on Tuesday thru Thursday then closed up on Friday but still lower on the week. The Fed raised 25 basis points, The employment report was firm with 250,000 jobs added and Apple reported OK results.
We sold the bank stocks for scratch (purchased last Friday) on Tuesday at the opening because they failed to rally Monday even though the FDIC resolved The Republic Bank crisis by allowing JP Morgan to purchase Republic Bank's remains out of receivership. Tuesday, Wednesday and Thursday short sellers (no uptick rule) continued to pressure the share prices of regional banks. Thursday afternoon we repurchased our trading bank stocks and ETFs in small amounts and sold for 3% to 5% profits Friday on the opening.
We also sold our retail stocks for too large losses and our other trading stocks for scratches and now own only Apache Oil and Paramount + which we purchased Thursday when it dropped 25% on a dividend cut and large onetime loss.
We are on the sidelines with 95% plus cash/Treasury ETF(USFR) in most accounts until after the debt ceiling tragic opera is settled.
We also sold two of the ETFs (SGOV and BIL) because their longest maturities are July 2023 and we don't know how the debt ceiling crisis may affect their ability to reinvest maturing bills and bonds.
The Treasury ETF we now own WisdomTree Floating Rate Treasury Fund
(USFR) owns only Treasuries on which the interest rate is reset on a formula based on each recurring 3-month T Bill auction. Current rate is over 5% and we expect it to stay there thru the summer. Even though the average maturity is 1.5 years the ETF maintains a relatively consistent price because the interest rate is set by the T Bill rate. For a more detailed explanation: https://www.wisdomtree.com/investments/tools#fund-comparison&tickers=BIL,FLOT,FLRN,USFR&tab=metrics
We are heading to Xavier University in Cincinnati next week to attend our granddaughter Abby's graduation -with honors. Our next post will be May 19th.
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