Lemley Yarling Management Co
309 W Johnson St
Madison, WI 53703
Comments on activity in client accounts
29 October 2021
Markets moved higher this week, ignoring a Wednesday swoon as the Goldilocks' view continued to comfort investors.
We continued to trade around positions selling some issues before earnings and buying some before earnings. Most of our trades worked except for Ford. We sold for a 5% profit last week expecting a negative reaction to earnings reported Wednesday afternoon. Wrong! The shares jumped 10% on blowout earnings and guidance. We swallowed our ego and repurchased. Ford may have just turned the minds of the big boys and girls who have been negative for years. And even with the double this year Ford is priced at $60 billion versus $1 trillion for Tesla.
We remain committed to the retail sector and our other holdings and plan on remaining mostly invested through year end.
22 October 2021
Markets continued to meander to new highs this week and we used the meandering as an opportunity to take some trading profits and redeploy the funds raised to issues we own. Since it is earnings season, we have been trading earnings reports.
We sold Intel ahead of earnings for a small profit and bought back a lesser amount after earnings $5 lower than we sold. We also purchased IBM (5% yield) $10 lower than it was trading before its earnings report. We sold Cleveland Cliffs for the 5th time this fall for a nice profit after it popped on great earnings. We still own U.S. Steel awaiting next week's earnings report. We realized a 20% profit in Macy's this week as it popped on a rumor that an activist investor wanted management to sell its on-line business. (That is a very dumb idea. Reminds of hedge funder Eddie Lambert thinking he knew how to run Sears. He did, into bankruptcy.). And we took a profit in Ford- again- as several brokerages recommended the shares. Ford is a good story but we think next week's earnings are not going to be as expected. We realized a scratch (better than a year's dividend) profit in Verizon as it popped 5%. We continue to trade Abercrombie for scratch and larger gains.
Our retail positions in American Eagle, The Gap, Bed Bath, And Urban Outfitters remain oversized. Their earnings come next month and will be good. Also, tax loss selling in these issues may have abated by then (they are up for the year but down 50% from their highs).
We now own dividend payers IBM, Intel, AT&T, Bristol Myers, Pfizer, Walgreens, Viacom, Newell. And we own AMC Entertainment, Carpenter Steel, Sprouts and Apache Oil.
We bought Revance Therapeutics at $15 on Wednesday after the FDA held approval of their drug (DaxibotulinumtoxinA as an injectable treatment for moderate to severe frown lines. The FDA determined it was unable to approve the BLA license, which allows a company to sell biologic products across state lines, in its current form, according to the company. The FDA further indicated that there were deficiencies related to the regulator's on-site inspection of the group's manufacturing facility, Revance said. The company plans to meet with the FDA as soon as possible to address the deficiencies raised.)
Relevance is one of the companies that were former favorites this year that are down 30% and greater as disappointment in earnings or prospects have led to tax loss selling. We are purchasing teses stocks for yearend/next year bounces as selling abates. Uber, Lyft, Twitter, Chewy, QuantumScape (batteries), ChargePoint Holdings (EV charging stations), Zillow and Wynn Resorts are others that we have purchased in small amounts.
OOOPS! At least we were lucky enough not to be these analysts.
Revance Therapeutics (RVNC)
October 13: Wells Fargo analyst Jacob Hughes reiterated a Buy rating on Revance Therapeutics yesterday. The company's shares closed last Monday at $27.30.
According to TipRanks.com, Hughes is a 3-star analyst with an average return of 9.5% and a 71.4% success rate. Hughes covers the Healthcare sector
The word on The Street in general, suggests a Strong Buy analyst consensus rating for Revance Therapeutics with a $37.20 average price target.
October 12 Mizuho Securities analyst Vamil Divan reiterated a Buy rating on Revance Therapeutics today and set a price target of $36.00. The company's shares closed last Tuesday at $20.45, close to its 52-week low of $19.51.
According to TipRanks.com, Divan is a 1-star analyst with an average return of -1.2% and a 46.7% success rate
Currently, the analyst consensus on Revance Therapeutics is a Strong Buy with an average price target of $35.40, which is a 29.7% upside from current levels. In a report released yesterday, William Blair also maintained a Buy rating on the stock
Bank of America kept its buy rating on the telecom and media company ahead of its earnings report on Thursday and said it sees a "favorable" rerating on deck for AT&T.
"We maintain our Buy rating. In our view, the current valuation incorporates a bearish outlook and out of favor investor sentiment, which we believe leaves room for a favorable rerating as it executes on separating into two more focused businesses.
An imaginary conversation between a coach and his long-suffering wife.
Nick Rolovich, head coach of the Washington State University football team, was fired on October 18 for failing to comply with the state vaccine mandate
put in place by Governor Jay Inslee. Rolovich was the highest paid state employee, receiving $3.2 million a year. ...
Well, today… Rolovich sought to claim victim status by filing suit, alleging that he was fired as a result of his religious faith. (Rolovich is Catholic, and, apparently, is unaware that Pope Francis is vaccinated and has been urging Catholics to get vaccinated.)
From his lawyer:
"It is a tragic and damning commentary on our culture and more specifically on (Athletic Director) Chun that Coach Rolovich has been derided, demonized and ultimately fired from his job merely for being devout in his Catholic faith," Brian Fahling, a lawyer for Rolovich, said in a statement obtained by ESPN and Yahoo.
Following is an (imaginary) conversation that happened in the Rolovich household on October 18th as Coach returned home from being fired.
ROLOVICH: Honey, you'll be proud of me. Today, I stood up for freedoms and liberties!
MRS. ROLOVICH: Oh? What did you do?
ROLOVICH: I got fired from my job because I refused their tyrannical vaccine mandate!
MRS. ROLOVICH: Wait... You what?!
ROLOVICH: I got fired rather than submit to their unconstitutional power grab!
MRS. ROLOVICH: Are you out of your freakin' mind? You assured me that they would NOT fire you!
ROLOVICH: I stood up for freedom.
MRS. ROLOVICH: Freedom?!!! Freedom???!!! You friggin' idiot!
ROLOVICH: But I---
MRS. ROLOVICH: I married a complete freakin' imbecile! A moron! A nitwit!
ROLOVICH: A freedom fighter?
MRS. ROLOVICH: You threw away our lives, our family's life, so you could be a "freedom fighter?" Are you kidding me? What the hell is wrong with you?
ROLOVICH: But I----
MRS. ROLOVICH: You specifically told me, and I quote, "They will never fire me. I'm the highest paid state employee and I'm the football coach," unquote.
ROLOVICH: Well, I was wrong. But I stood up for----
MRS. ROLOVICH: We'll have to sell the house! The kids will have to change schools! YOU IDIOT!!!!!
ROLOVICH: I'll... I'll... I'll get a lawyer and sue them!
MRS. ROLOVICH: On what grounds?
ROLOVICH: That my faith wouldn't allow me to get vaccinated!
MRS. ROLOVCH: We're Catholic. The Pope is vaccinated. He told everyone to get vaccinated. What the hell is wrong with you?
ROLOVICH: I'm being persecuted for my religion!
MRS. ROLOVICH: No, you're a moron who threw away a three million dollar-a-year job because you watch Tucker Carlson every night. He got vaccinated! Fox News has a vaccine mandate!
ROLOVICH: They do?
MRS. ROLOVICH: Yes, they do.
15 October 2021
Markets may have ended their correction moving higher into week end. We took trading profits in Wells Fargo, Abercrombie, Apache, Walgreens and also plus scratched on The Container Store, Cleveland Cliffs, Canadian Solar and ARKK.
We took a too large loss in Altice as cable providers continued under pressure. We may revisit after 30 days. We added to our holdings in Verizon and Western digital and Repurchased Ford higher and AT&T lower.
Comments on Bed Bath which has taken quite a hit in the last month. We are trading around setting up non wash sell losses.
A ‘Shoeless' Joe Jackson photo sold for $1.47 million. Here's why it was so valuable.
'Entirely unsurprising': Merck slammed for 4,000% markup of taxpayer-funded Covid drug
We're too old to understand
In just two years, the D'Amelios have gone from an anonymous family in suburban Connecticut to one of the world's most-followed households, with audiences on social media, Spotify, and TV.
With that fame has come money: The family has tenaciously chased business opportunities. Charli and Dixie D'Amelio, the family's daughters and most famous members, started with one-off sponsored posts on TikTok for everything from the "Sonic" movie to a song for the singer Flo Milli.
"It has always seemed strange to me...The things we admire in men, kindness and generosity, openness, honesty, understanding and feeling, are the concomitants of failure in our system. And those traits we detest, sharpness, greed, acquisitiveness, meanness, egotism and self-interest, are the traits of success. And while men admire the quality of the first they love the produce of the second."
― John Steinbeck, Cannery Row
8 October 2021
We are in the land of milk and honey enjoying the autumn colors and our 78th birthday. We've been trading a bit (profitably) but continue to hold most of the positions mentioned in last week's post. Our oversized retail holdings are negatively affecting short term performance but we expect an excellent Christmas shopping season.
We offer the following comments and news items.
A shooting of 4 people at a school in Texas merited page A20 in the NYT.
Nice to be able to trade on tomorrow's news today:
Pressure is mounting on the Federal Reserve over whether the stock trading activities of top officials violated ethics rules and the law, raising questions about who within the central bank should be held responsible.
Scrutiny on the central bank has intensified since two Fed regional bank presidents — Robert Kaplan and Eric Rosengren — exited their posts last week amid revelations of their trades during the covid crisis. Then on Friday, Bloomberg News reported on trades made by Fed Vice Chair Richard Clarida, which were made the day before the Fed said it would "act as appropriate to support the economy" in February 2020, as the pandemic began to wreak havoc on the economy.
Luckily, we can afford it.
Medicine for our diabetes. 3-month supply.
|Trulicity 0.75mg/0.5ml Sdp 0.5ml
*Retail price; insurance has not been applied.
Beer to inspiration- not such a stretch.
Pinterest, Inc. provides visual discovery engine in the United States and internationally. The company's engine allows people to find inspiration for their lives, including recipes, style and home inspiration, DIY, and others. It shows them visual recommendations based on people personal taste and interests. The company was formerly known as Cold Brew Labs Inc. and changed its name to Pinterest, Inc. in April 2012. Pinterest, Inc. was founded in 2008 and is headquartered in San Francisco, California.
What could go wrong?
Some financial advisers have a new sales pitch for investors: You win when bitcoin goes up, and you can win when it goes down.
The wealth-management industry is starting to make the case that cryptocurrencies have a place alongside stocks and bonds in investment portfolios, even retirement accounts. A number of personal money managers are offering products that let investors buy their own stashes of bitcoin, ether and other digital currencies through their brokerage accounts.
Cryptocurrencies have surged this year, as investors, many flush with cash from government stimulus checks, have chased the potential for gains. Bitcoin breached $63,000 in the spring, a 2,000% increase since the end of December.
Big losses can follow big gains in investing, and cryptocurrencies are no different. Bitcoin shed half of its peak value through July but remains up 50% for the year. Ether, another popular cryptocurrency, has held up better, rising threefold in 2021. But rather than stomaching crypto losses, financial advisers are pitching investors a way to use them to offset investment profits elsewhere.
Here's the pitch: Investors can buy bitcoin, ether and other cryptocurrencies through their broker. If cryptocurrencies fall by a certain amount, the accounts are set to automatically sell the digital coins, generating a taxable loss that can be used to offset other investment gains. The accounts then buy the coins back in a short time for around the same price or even less.
Doing this is a no-no with stocks, bonds, options and many other securities, thanks to the "wash sale" rules that restrict capital-loss deductions when investors purchase an asset within 30 days of selling it for a loss. Cryptocurrencies evade the rules because they are considered property by the Internal Revenue Service. But that is likely to change soon. The House Ways and Means Committee approved a proposal to treat cryptos like other securities that, if enacted, would kick in Jan. 1. Lawmakers project that the proposal, which is part of a package of proposed tax increases to help pay for the $3.5 trillion budget bill still being negotiated, will raise $17 billion over a decade.
The other fight behind the Build Back Better measure is over how Americans choose to spend their tax dollars. Republicans, and even some conservative Democrats like Manchin, believe that spending $3.5 trillion ($350 Billion per year) on human infrastructure is a waste of money and that the new programs will create an "entitlement mentality."
In contrast, though, Congress spends very little time discussing the defense budget, which, at its current rate, would cost $7.78 trillion over the next ten years. That amount is significantly higher than the defense spending of any other nation in the world. In 2020, the U.S. spent $778 billion on defense, making up 39% of our overall spending. China, the country with the next highest defense budget, spent 13% of its overall spending on defense at $252 billion, India spent 3.7% at $72.9 billion, Russia spent 3.1% at $61.7 billion, and the United Kingdom spent 3% at $59.2 billion.
Heather Richardson Cox Daily Letter:
The steel industry is enjoying unprecedented prosperity, as steel prices have nearly quadrupled in the past year to $1,900 a ton. Yet steel stocks sport some of the market's lowest valuations. Leading companies such as Nucor , Cleveland-Cliffs , United States Steel , and Steel Dynamics trade for two to five times 2021 estimated earnings. They could be worth far more as steel demand grows.
"We're seeing a rebirth of the U.S. steel industry," says Curt Woodworth, a steel analyst at Credit Suisse. "The industry is healthier than it has ever been, profitability is at an all-time high, balance sheets are in their best shape in a long time. The stocks are greatly undervalued."
Cleveland-Cliffs (ticker: CLF) expects to be debt-free in 2022, Formerly a producer of iron ore, Cleveland-Cliffs is now a major steel maker, following two acquisitions last year. It has a shareholder-oriented CEO in Brazil-born Lourenco Goncalves, who owns $100 million of its stock. At around $20, Cleveland-Cliffs stock trades for 3.4 times projected 2021 earnings of nearly $6 a share. "The company bought two steel makers at the bottom of the market and is a prudent allocator of capital," says Michael Glick, a steel analyst at J.P. Morgan. He has an Overweight rating and a $40 price target. Cleveland-Cliffs has been noncommittal about capital returns, but buybacks and the initiation of a dividend are possible in the coming year.
U.S. Steel (X) is moving in that direction. U.S. Steel also has a fully funded employee pension and retiree healthcare plan. The industry's improving financial condition could lead to higher dividends and a loftier valuation.
Steel stocks are up sharply this year, but down an average of 20% from their August highs. Investors worry that steel prices will collapse in 2022 as new supply enters the market. They also want steel makers to ramp up dividends and stock buybacks, as other commodities producers have done.
A glitch in an update this week to the decentralized finance platform Compound has led to roughly $89 million worth of a cryptocurrency called COMP to be accidentally sent out to users.
Now the CEO is asking users to voluntarily return the funds.
"If you received a large, incorrect amount of COMP from the Compound protocol error: Please return it to the Compound Timelock," Robert Leshner tweeted. He also threatened to report to the Internal Revenue Service all of those who did not and later apologize for the "bone-headed tweet." Compound and Leshner did not immediately respond to a request for comment.
Compound allows users to lend out their crypto assets and earn interest, and the platform is governed by computer code protocols that are voted on by the community and subject to a seven-day governance process.
Because I'm in that kind of mood:
The old lady handed her bank card to a bank teller and said, "I would like to withdraw $10
The teller told her, "For withdrawals less than $100 please use the ATM."
The old lady wanted to know why ...
The teller returned her bank card and irritably told her, "These are the rules. Please leave if there is no other matter. There is a line of customers behind you."
The old lady remained silent for a few seconds, then handed the card back to the teller and said, "Please help me withdraw all the money I have."
The teller was astonished when she checked the account balance. She nodded her head, leaned down and respectfully told her, you have $300,000 in your account and the bank doesn't have that much cash currently. Could you make an appointment and come again tomorrow?
The old lady then asked how much she could withdraw immediately.
The teller told her any amount up to $3000
"Well, please let me have $3000 now", she the teller then handed it very friendly and respectfully to her
The old lady put $10 in her purse and asked the teller to deposit $2990 back into her account.
the moral of this tale .......
Don't be difficult with old people, they spent a lifetime learning the skills.
Governments helping the needy
Amazon has won more tax incentives from local and state US authorities to expand its delivery network in 2021 than ever before, according to data gathered by economic development watchdog Good Jobs First and reported by The Financial Times.
Per Good Jobs First's data, Amazon has won at least $669 million in subsidies from local and state governments since the beginning of 2021. All the subsidies were to help the retail giant build out its one-day or same-day delivery networks locally, except for $21 million tax credits for the company's filming division Amazon Studios.
Per The FT, this is the most tax incentives Amazon has won in any single calendar year to expand its delivery network since Good Jobs First started collecting the data in 2000.
The watchdog estimated that Amazon had received at least $4.1 billion in incentives since 2000. Amazon received $750 million in 2019 to build its new headquarters in Arlington, Virginia.
"The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little."
-- FDR, Inaugural Address, January 20, 1937.
1 October 2021
A hamster has been trading cryptocurrencies in a cage rigged to automatically buy and sell tokens since June - and it's currently outperforming the S&P 500
We were sailing along this week happily taking trading profits and redeploying the money when Bed Bath ruined our Thursday with lousy numbers and crashed 30% taking all our retailers down with it. Such is life in September and early October. Bed Bath traded half its outstanding shares on Thursday as the short sellers and put option buyers used the lack of an uptick rule to raid the stock. Interestingly the pullback in BBBY almost closed the gap up from a year ago when the company reported better than.
We used the sell off to add more shares as we listened to the talking heads pummel the earnings report. By the by, many of the talking heads pummeling the company were the same who marveled at BBBY's excellent report last year. As all retailers retreated, we did sell Nordstrom for a loss as we listened to an analyst provide negative comments on Kohls driving that stock down 15%. Nordstrom has a huge just opened store in New York that was built to capture the tourist trade which is still non-existent. So, our guess is that the report in November will be less than and we will revisit the company then. We also sold American Eagle for a minimal gain/loss and redeployed the money into The Container Store at a price 20% lower than we sold on Tuesday. And we reentered Macy's in accounts.
We begin the month with positions in XLK (MSFT/APPL ETF): ARKK (Fancy stock ETF down 30% from high); Nucor Steel (traded for $5 per share profit this week then repurchased lower on Friday); Wells Fargo; Pfizer; Walgreens; Verizon; Intel; AMC Networks; Canadian Solar; Abercrombie; Urban Outfitters; Macy's; The Gap; Bed Bath; The Container Store; Apache Oil; Cleveland Cliffs Steel; Altice USA (Internet provider on East Coast) and Rite Aid. We traded out of Ford to set up losses and hope to reenter before year end. We also took trading profits in Huntington Bank, Hewlett Packard Enterprises, GE, IBM, NiSource and Carpenter Tech.
The great enemy of freedom is the alignment of political power with wealth. This alignment destroys the commonwealth - that is, the natural wealth of localities and the local economies of household, neighborhood, and community - and so destroys democracy, of which the commonwealth is the foundation and practical means."
― Wendell Berry, The Art of the Commonplace: The Agrarian Essays
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