Equity markets shook off the malaise that took hold at the end of the second quarter—remember Brexit?—to post a strong quarter all around. Returns were especially good in domestic small caps and international stocks. While the S&P 500 Index advanced +3.85%; the Russell 2000 Index jumped +9.05%; and the MSCI EAFE Index rose +6.43%. The third quarter was the best period for the MSCI EAFE Index in nearly three years, and the best for the Russell 2000 Index in almost two years. We do not believe much changed to drive this result: we simply think people recognized the economy is sound and interest rates remain low—a good environment for equities. This quarter, Ariel Appreciation Fund rose +7.00%, outperforming the Russell Midcap Value Index’s +4.45% rise, as well as the +4.52% return of the Russell Midcap Index.
Some of our holdings rose nicely during the quarter. Cutting tools maker Kennametal Inc. (NYSE:KMT) jumped +32.19% as its modernization efforts started to gain traction. To a large extent this means more automation, which increases efficiency and slashes costs. The company is also focusing on its more profitable, large customers and shedding smaller ones. We see these moves as an essential part of making its moat wider and better; we think the financial benefits will be significant and long lasting. Also, asset manager and financial advisory firm Continue Reading »