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

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Autumn 2019

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.

Black Friday 2019

November markets rallied which is unusual action versus the last few years.

During the week we repurchased Abercrombie ($3billion in sales with over $1 billion on line) which we have traded profitably over the last several years even though the share price is down 50% over the same time period. ANF announced flat revenues and minus same store sales but we were satisfied that the company is on track. Moreover, with a high of $31 this year the share price is under tax loss selling pressure and constant negative comments from talking heads.

The same goes for The Gap which has $15 billion in sales($3 billion plus on line), debt equaling cash, and talking heads commenting that the company doesn't have a chance to survive. The Gap will split next year into Old Navy which will the value/discount company with The Gap and Athleta and Banana Republic comprising the premium company. GPS is also downsizing stores and renegotiating leases. The share price is down 45% which also makes it a tax loss candidate.

Hewlett Packard Enterprises dropped 10% on less than outlook and reenters it gingerly in larger accounts.

We have been reducing our cash positions as we add to holdings and look to find tax loss candidates that will pop after year end when selling pressure on them is relieved.

We now own: AT&T. Cisco, Shake Shack, Twitter, United Natural Foods, Sprouts, Hewlett Packard Enterprises, Nokia, Abercrombie, the Gap, Under Armour, Urban Outfitters, Macy's, Michael's Stores, and Ascena.


Abercrombie & Fitch Co. said Tuesday it had net income of $6.523 million, or 10 cents a share, in its fiscal third quarter to November 2, down from $23.9 million, or 35 cents a share, in the year-earlier period. Adjusted per-share earnings came to 23 cents, below the 24 cents FactSet consensus. Sales rose to $863.5 million from $861.2 million, but were also below the $868.0 million FactSet consensus. Same-store sales were flat, compared with a FactSet consensus for growth of 0.3%. "Continued U.S. momentum was offset by challenges across several of our key international markets as well as a complicated global operating environment, which weighed on overall results," Chief Executive Fran Horowitz said in a statement. The operator of the Abercrombie and Hollister clothing brands said it now expects fiscal 2019 sales and same-store sales to be flat to up 1% and for fourth-quarter sales and same-store sales to be flat to up 2%. The retailer is expecting China tariffs to shave about $4 million off gross profit in the fourth quarter and $5 million in the full year. About 25% of the company's merchandise in fiscal 2018 was sourced from China.


Glass half empty or half full?

Hewlett Packard Enterprise revenue misses estimates, shares fall



Hewlett Packard Enterprise (HPE) Q4 Earnings Top Estimates


Under Armour Inc. stock rose 2.6% in Wednesday premarket trading after it was upgraded to strong buy from outperform at Raymond James based on sales of new products and an upbeat outlook about the federal accounting investigation now underway. Raymond James maintained its $30 target price. Under Armour has cleaned up inventory in order to make room for new merchandise, which Raymond James says is selling "at higher levels" in the wholesale channel. The improved merchandise position, and the innovation ahead, will make the transition to the new chief executive, Patrick Frisk, easier. Moreover, Raymond James has spoken to investors who think the federal investigation into the company's accounting will yield little outcome.


Some folks are beginning to see the rhyme between the present market and 1999 into 2000.

From the WSJ-Once Silicon Valley's highest-flying darlings, companies from WeWork to Uber Technologies Inc. have collectively lost about $100 billion in value this year, prompting some startup executives to talk up profitability over growth as venture-capital investors grow more cautious about spending.

In recent weeks, car-subscription company Fair and software company UiPath have downsized. Scooter-renting company Lime has rejiggered its operations to prove to investors it can turn a profit.

"We've been in the middle of a rollicking party that's gone on for five years and someone has snapped on the light switch,'' said Chris Douvos, whose firm, Ahoy Capital, invests in venture-capital firms and startups. "We are all adjusting our eyes and no one has any idea how the rest of the night is going to go. That's how Silicon Valley feels right now."

The startup industry remains awash in cash, and with interest rates staying historically low, any further steep decline in the private markets is unlikely, investors say. Still, the magnitude of the value destruction has cast a level of uncertainty over the venture-capital industry not seen in years. It has also prompted some soul-searching and calls by investors for stricter corporate governance.


22 November 2019 (56th anniversary of John Kennedy’ assassination)

Markets moved moderately higher during the week on tepid volume. We sold ViacomB and CBS for scratch profits and placed those funds in Urban Outfitters, AT&T, Macy's, United Natural Foods and Twitter.

We have traded URBN, UNFI, and AT&T profitably this year.

The gurus don't like Macy's and didn't like this week's earnings report even though the stock is priced at 5 times earnings and yields 9%. Moreover, it has reduced debt by $3 billion over the last 5 years to a more manageable $4 billion. Since M is down 50% this year it is a tax loss candidate and that is added pressure which will be relieved by year end.

We traded Urban profitably in September/October when it dropped 20% on less than earnings, and it did the same this week at higher levels. We again purchased on another 20% drop.

AT&T dropped 10% this week on two broker sale recommendations. The one sale guru maintained his $30 price target and the other his $38 price target. The $30 fellow has been incorrect all year and we don't think he is correct now. As we have all year, we are in the shares for a trade/dividend play. We bought shares under $38 in larger accounts.

UNFI popped on earnings to $13 in September and since then has backed off under selling pressure in retail and tax loss allowing us to repurchase in the $8 range.

Michaels is again under tax loss selling after popping to $11 on good earnings in September and now has backed off and is under retail/tax sale pressure since it sold at $19 earlier this year.

Most accounts, except the smallest, continue to have large (50% and more) cash positions. We have been committing funds for over year end trades and may do more in the coming weeks depending on individual stock movements.

Happy Thanksgiving.

15 November 2019

Markets are meandering as tax loss selling and rotation from the no earnings wonder stocks to value growth takes place.

During the week we added Twitter which is priced at only 12X earnings.

We currently own:

ViacomB, & CBS, to merge in December with VIAB shareholders receiving 0.59625shres of CBS for each VIAB share.

Shake Shack under pressure from less than earnings and tax loss selling because down from $125 to $62 this year.

Beyond Meat is up from $45 (first trade) and down from $239 this year to $80. And so, tax loss selling is occurring coupled with the opening of the ability of insiders to sell stock in the open market.

Twitter is remarkably priced at 12 times earnings.

Nokia is down because of less than quarterly sales and less than earnings. Own for 5G rollouts. Nokia has $7 billion in cash versus $3 billion in Long term debt ($1 per share for a stock at $3.50).

Tapestry (Coach and Kate Sade) had a disappointing quarterly report with a 5% yield.

Under Armour is off because of tepid quarterly numbers and the news that its previous revenue numbers are being investigated. Our take is that the investigation news refers to years prior to 2017 and that present numbers are OK.

Macy's is the retail Department store that the gurus hate. P/E of 6X and yield is 9%.

Michael's is the arts and craft store chain that is 50% owned by Bain Capital. MIK has too much debt but is priced at 4X earnings. We have traded profitably this year.

Ascena is our busted retail long shot hope.


8 November 2019

Markets continued to meander higher during the week. We added two low flying high flyers as the beginning of our year end buying for a January pop. We were overly aggressive on the Shake Shack purchase and reduced it a few days later and added Beyond Meat with the funds. Shake Shack is under pressure at $65 after trading at $105 earlier this year. SHAK is a favorite of the growth versus earnings crowd and we think a lot of day traders were in the stock. Given the profits many folks have this year, the high flyers like SHAK and Beyond Meat (we purchased at $80 down from $239- yes $239- earlier this year) are obvious tax loss candidates.

We also added Under Armour when it dropped 20% on news that it has been under investigation for accounting issues since 2017. Our thought is that this is old news in that UA has known of this investigation for 2 years so that recent sales and earnings numbers are probably OK. Coupled with the resignation of founder Kevin Plank as CEO -retaining the chairmanship-our view is that the reaction is overdone. Earnings and sales announced this week were fine although going forward forecasts were less than the street expected. We've been trading the shares profitably for two years.

Finally, we repurchased Michaels, Tapestry and Macy's to continue trading them as we have done -profitably- this year.

Since we used the AT&T proceeds from the profitable sale last week most accounts remain with very comfortable cash positions.

3 degrees above this morning, too too early. Brrrrrrrrrrrrrrrrrr.


Under Armour:

Goldman Sachs is sticking with its buy rating on Under Armour, even after shares plunged following disappointing quarterly update and the revelation of a federal investigation into the apparel maker.

"We come away from results with our long-term thesis intact," Goldman Sachs analyst Alexandra Walvis wrote in a note to investors. The firm removed the stock from its list of favorite stocks, but maintained a buy rating.




Shake Shack reported earnings that beat expectations; however, revenue and same-store sales fell short of Wall Street estimates, sending its stock reeling.

Following the results, shares of the burger chain, which closed Monday's trading up nearly 2% at $84.30 — tanked by more than 12% in after-hour trading. Shake Shack shares opened Tuesday's session down more than 17%.

Here were the numbers for Shake Shack's third quarter, compared to Bloomberg-compiled estimates:

Revenue: $157.8 million vs. $157.92 million expected

Adjusted earnings per share: 26 cents vs. 21 cents expected

Same-store sales: +2% vs. +2.9% expected

The burger chain boosted its full-year revenue guidance and now expects between $592 million to $597 million, up from the previously expected $585 million to $590 million. However, Shack slashed its same-store sales growth expectations for the full year. It now anticipates 1.5% growth, down from the previously expected 2% growth.


Beyond Meat Inc. shares rose 3% in Tuesday premarket trading after the plant-based meat maker was upgraded to outperform from market perform at Bernstein based on optimism about stock price upside. Beyond Meat maintained its $106 price target. On July 26, Beyond Meat stock closed at a high of $234.90. Shares fell 2.7% on Monday to close at $79.79. Shares fell last week despite reporting its first profit as the lockup on Beyond Meat stock expired. "While the stock could remain volatile due to more insider/pre-IPO shareholder selling in the coming days, we believe the risk/reward skews towards the upside at the current level," analysts led by Alexia Howard wrote. Bernstein analysts say Beyond Meat's trial of the Beyond P.L.T. burger at McDonald's Corp. in Canada hasn't been a "blowout," but in a best-case scenario, Bernstein says it could take Beyond Meat sales from $280 million in fiscal 2019 to $910 million in fiscal 2021. Beyond Meat stock has sunk 54.7% over the last three months while the S&P 500 index is up 8.2% for the period.


Tapestry on Tuesday reported that first quarter net sales fell 2% to $1.36 billion. By brand, Coach net sales rose 1% year over year to $966 million, gaining some 100 basis points through global e-commerce; Kate Spade net sales fell 6% to $306 million; and Stuart Weitzman net sales fell 9% to $87 million.

Comparable sales at Coach edged up 1% but tumbled 16% at Kate Spade, according to a company press release. The company didn't provide total comps or results for Stuart Weitzman in that metric.

Gross profit in the quarter fell to $914 million on a reported basis, from $935 million a year ago, while gross margin for the quarter contracted to 67.3% from 67.7%. Net income fell to $20 million on a reported basis, from $122 million in the year-ago quarter.


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