Lemley Yarling Management Co
309 W Johnson Street
Madison, WI 53703
Comments on activity in client accounts
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27 November 2020
We did a lot of trading this week taking profits on last week's purchases and reinvesting a bit but mainly getting cash to 50% and more in many accounts.
We did have a ‘master of the universes' losing trade in American Eagle that cost us a few dollars. We took a position in AEO ahead of earnings and then when earnings were reported we noticed that in April this year the company sold $400 million in bonds convertible at $8.60 plus which represents a 25% dilution. While it did allow the company to have cash on hand for the pandemic it seems to us that management was panicked and not well served by their investment bankers into taking an action to the detriment of shareholders. It would have been much better for them to sell straight bond at double the interest rate to raise the cash. The fact that the convertible bonds were privately placed suggests to us a less than informed decision. Anyway, there are other retailers we like and we did reinvest the funds raised in The Gap which was down 20% in a day on less than earnings and also Macy's which has recently caught a bid on OK quarterly revenues and bottom fishing in retailers as vaccine Covid recovery investments.
We currently own a diversified list of stocks: BankAmerica, Gilead, Walgreens Boots, Pfizer, Intel, Cisco, AT&T, The Gap, Abercrombie, Macy's, Sprouts Food Mkts, United Natural Foods, GE, Ford, XLE (oil ETF) and Marathon Oil.
"I had for my winter evening walk —
No one at all with whom to talk,
But I had the cottages in a row
Up to their shining eyes in snow.
And I thought I had the folk within:
I had the sound of a violin;
I had a glimpse through curtain laces
Of youthful forms and youthful faces.
I had such company outward bound.
I went till there were no cottages found.
I turned and repented, but coming back
I saw no window but that was black.
Over the snow my creaking feet
Disturbed the slumbering village street
Like profanation, by your leave,
At ten o'clock of a winter eve."
20 November 2020
Happily, the last 45 days have been kind to our accounts and they are now on their highs for the year. Unfortunately, the Covid crisis continues with record daily cases, hospitalizations and deaths. There are two vaccines ready for approval with more to come soon and hopefully the new administration will be able to improve the provision of masks and PPE gear for the front-line hospital and nursing home workers and develop a cogent plan for vaccine distribution.
With the markets on their highs for the year there is a chance of retrenchment but the companies we own- and have been trading all year- will benefit from the eventual recovery. As we have all year, we will continue to trade and react to events. And we continue to maintain a 30% and higher cash posting in most accounts.
Indian summer continues in the land of milk and honey. Wear your mask and stay safe.
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13 November 2020
The Monday announcement by Pfizer of an effective vaccine caused the DJIA to open 1800 points higher. We used that short covering pop to take profits and midweek moved back into several issues on their subsequent pullback, selling several repurchases at week end to raise cash and realize more short profits.
With the election resolved, except for the noise, the markets are now concentrating on earnings and the discussion between value and stay at home stocks. Stay at home stocks are overpriced- as they have been for the last 6 months. Value stocks catch a bid every few days and then pull back but to higher levels.
The Covid numbers scare us- hospitalizations are over 6000 and deaths per day will soon be over 3000. We remain cautious with all accounts positive for the year and many up 6% and greater.
We end the week owning AT&T, Intel, AMC Networks, United Natural Foods and large cash positions.
6 November 2020
An interesting week ended with our accounts on their highs so we raised cash.
More next week.
Comments on activity archives
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