Tuesday December 18, 2012
by Walter Frank, editor MoneyLetterValue investing in the style of Warren Buffett or Sir John Templeteon are put to work in the Ariel family of funds; at
Ariel Investor Fund (
ARGFX), founder and portfolio manager John Rogers take this approach to heart, while also overlying social screens in the process of investing for the long term.
At the idea generating phase, Rogers, along with co-managers John Miller and Kenneth Kuhrt, filter through ideas, using computer screening, meetings with industry experts, and personal research. From there, the intensive research begins.
The group interacts with company managers to evaluate management's ability and quality. They assess each firm's competitive moat, and analyze its financial position and growth prospects.
Valuation is a key component of the process. Ariel want to buy a stock at a 40% or greater discount to private market value and/or selling at a p/e of 13 or less based on forward cash earnings estimates.
Ariel managers have followed this strategy since the fund was founded in 1983, and garnered a strong record with a lower risk profile. In the depths of the financial crisis in 2008, Rogers was aggressively buying beaten-up stocks, leading to a category topping return of 63.4% in 2009.
The fund's strategy leads to a concentrated portfolio of (37 stocks); recently, it was overweight in consumer discretionary and health care, and underweight in producer durables, energy and technology.
Top holding Gannett, a media firm, has been a strong performer, up 38% this year. Other consumer firms such as Royal Caribbean and Mohawk Industries have been even stronger. Several top financial holdings, including Janus Capital and First American Financial have also added meaningfully to recent results.
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