Ariel, a renowned $18 billion value investment firm, has seven different funds. Here’s what they’re buying as growth and technology funds get a long delayed ‘return’


  • Ariel Investments, a value stock company, manages approximately $18 billion in assets.
  • The company’s managers recently discussed what to buy with different funds and strategies.
  • The flagship Ariel fund was one of the best bull markets of the 2010s.

There aren’t many people on Wall Street right now to brag about their stock pick success, but it’s easy to get the feeling that value investors are feeling good about the situation.

the general method of


value investment

— Buying cheap stocks based on common metrics like price-to-earnings ratio (PER) or return on equity (ROE) — It has a long and venerable bloodline that includes investors like Benjamin Graham and celebrities like Warren Buffett. But in the 2010s, most of them looked like museum pieces.

For more than a decade, many tech and consumer goods stocks have made great returns regardless of what their P/E ratios have been or how well they have performed in the past. There didn’t seem to be much reason to buy undervalued stocks in a situation where anything else could provide much more explosive growth each year.

Things have changed a lot since November. The economic impact of COVID-19 is easing. Interest rates are rising and are likely to continue rising for months to come. Economic growth is broader and stronger than most of the past decade. All of this tends to make investors less interested in growth stocks and is great for value.

Ariel Investments was one of the exceptionally prominent value-oriented companies of the time. The company’s mid-cap funds, for example, were best-in-class during the last bull market. Nevertheless, calls with investors and media this week showed signs that Ariel’s leader is content to say that Value is spending another moment in the sun.

President and Co-CEO Melody Hobson said the widespread loss to technology and growth is “a win-win.”

“The time has come when it is no longer fashionable to make losses,” said Rupal Bhansali, chief investment officer of global equities.

Of course, that could be just gibberish in the investment world. However, the company, which said it had $17.8 billion in assets at the end of April, seems to feel that the wind is blowing behind the scenes.

“We bought aggressively during the coronavirus crisis,” said co-CEO and portfolio manager John Rogers. “We have continued to buy aggressively over the past few weeks.”

According to data provided by Ariel, Ariel’s call participants included seven mutual fund and strategy managers as of April 30, which outperformed broad market benchmarks such as the S&P 500 and Russell 2000. In most cases, it outperformed value benchmarks from Russell or MSCI.

This means you lose less than your competitors or the rest of the market. Ariel says this is provided to investors over time by minimizing losses in a bear market and remaining stable for a better period.

international stock ideas

Bhansali, who manages Ariel’s global equity strategy, said he was looking for new opportunities in emerging markets that seemed too expensive and risky before the recent downturn.

“Both stock markets and currencies have been selling, giving us a lot of trading opportunities in those kinds of markets,” she said. “A Brazilian franchise quality company that we’ve been eyeing for a long time, but never been part of the scope and risk-reward we’re looking for. Telefonica Brazil, BB Seguridade in Brazil, Credycorp in Peru.”

Many Latin American countries are benefiting from rising commodity prices, which is good for their stocks, even if they aren’t commodity companies.

She added that communications did very well in her strategy this year.

“Some of the companies I’ve liked for a long time have been sold on overly pessimism. Nintendo And China Mobile“Communications are the new consumer staple,” she said.

When it comes to technology, Bhansali says Chinese stocks will take a leading position in areas such as artificial intelligence and AI. Baidu You must be the best performer.

“Thanks to their early and wise investments in this space, they will become leaders in autonomous driving, one of the largest and most lucrative applications of AI in big data,” she said.

American leaders

Rogers said Ariel has been buying shares in the housing industry and investors are being hit by concerns that rising prices and mortgage rates will erode demand. This includes carpet makers. mohawk industry Smart thermostat and household goods maker Regideo.

Charles Bobrinskoy, who runs Ariel’s Focus Fund and Focused Value Fund, said that tool maker Resideo Stanley, Black and Deckerand casino operators void game It is trading at a meaningful value over a period of time.


recession

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“Actually, I think we’re at the peak of our pessimism,” said Bobrinskoy. “Economically sensitive companies, especially consumer discretionary stocks, trade at very low valuations.”

Ken Kuhrt, co-manager of the company’s small cap value and small cap value focus strategy, said the company is looking for opportunities in areas affected by the pandemic, such as cruises and sports. Rogers has long been evangelizing. Madison Square Garden Entertainment with your favorite stock — and Nielsen And Mattel Well done for Ariel.

Kuhrt says both Mattel and Nielsen are potential buyers, and Mattel is doing a good job of expanding the value of the business.

Meanwhile, Bhansali adds: Microsoft Products such as Outlook, Word, and Excel are indispensable to businesses, making them consumer staples. There is also a lot of room to increase the price of many products. It will strengthen margins, earnings and the performance of stocks.

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