John Rogers

Last Update: 11-14-2016

Number of Stocks: 185
Number of New Stocks: 8

Total Value: $8,267 Mil
Q/Q Turnover: 4%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

John Rogers Watch

  • Weekly 3-Year Low Highlights: CHL, TM, STO, NTT

    According to GuruFocus list of 3-year lows; China Mobile Ltd, Toyota Motor Corp, Statoil ASA, and Nippon Telegraph & Telephone Corp, have all reached their 3-year lows.


    China Mobile Ltd (NYSE:CHL) Reached $60.94

      


  • Guru Stocks at 52-Week Lows: CHL, TM, SNY, NVO, TSM

    According to GuruFocus list of 52-week lows, these Guru stocks have reached their 52-week lows.


    China Mobile Ltd (NYSE:CHL) Reached the 52-Week Low of $60.94

      


  • 5-year lows: Aeropostale Inc, Multi-Fineline Electronix Inc, Layne Christensen Co, and Forest Oil Corp.

    According to GuruFocus list of 5-year lows, these Guru stocks have reached their 5-year lows: Aeropostale Inc, Multi-Fineline Electronix Inc, Layne Christensen Co, and Forest Oil Corp.


    Aeropostale Inc (NYSE:ARO) Reached $3.17

      


  • John Rogers' Ariel Fund July Commentary

    Our May commentary addressed U.S. stock market performance from January to May. As you may recall, returns had been up and down, large and mid caps had trounced small caps, and value had beaten growth. While the returns of Ariel Fund and Ariel Appreciation Fund were quite similar, the disparity between benchmarks made Ariel Fund look solid and Ariel Appreciation Fund appear lethargic. This commentary will focus more attention on assessing performance generally and on the Russell Midcap Value Index in particular.


    Dissecting investment results can be tricky. First and foremost—and this is no secret—strong absolute returns sometimes mask poor relative returns, while low absolute returns can actually be solid in a given market environment. That is, a +10% gain is not astounding in the context of a market that is up more than +32%, as the market was in 2013. By contrast, a –10% loss would have been stellar for an equity portfolio in 2008, when the S&P 500 plummeted –37%.

      


  • Widely Held Guru Stocks Near Historical Low P/B Ratios

    Buying stocks at historically low price-to-book (P/B) ratios has been an effective strategy. The model portfolio, “Top 25 Historical Low P/B Ratio Companies”, has outperformed the S&P 500 by 29.51 percent since its inception in 2010. The following stocks are widely held by the investing gurus we follow and are trading near their historical low P/B ratios:


    Kellogg Company (K) is trading at a low P/B ratio of 6.10, near its 10-year low of 5.88. Its principle products are ready-to-eat cereals and convenience foods, such as cookies, crackers, savory snacks, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles and veggie foods. The 5- and 10-year median P/B ratios are 8.4 and 8.5. At the 5-year median, the stock would be priced at $87.60. Book value per share has been growing at an annual rate of 11.90 percent over the past five years. The stock is held by 18 gurus we follow with Hotchkis & Wiley having the largest holding of 2.43 million shares, representing 0.68 percent of the shares outstanding.

      


  • Goldman Sachs: A Strongest Investment Bank

    In this article, let's take a look at The Goldman Sachs Group, Inc. (NYSE:GS), a $77.3 billion market cap company, which is one of the world's leading investment banking and securities companies.


    Well-Positioned

      


  • This Tobacco Stock Looks Attractive Enough

    In this article let's take a look at an option for investing in the tobacco sector with British American Tobacco plc (BTI), which sells tobacco products in 180 countries. The company holds leadership positions in around 50 of them. Brands like Dunhill, Kent, Pall Mall, and Lucky Strike account for one third of group sales because they are well known and have been gaining share over the past several years.


    Competitive Advantages

      


  • John Rogers' Ariel Fund Q2 2014 Shareholder Letter

    Investing in small- and mid-cap stocks is riskier and more volatile than investing in large-cap stocks. The intrinsic value of the stocks in which the portfolio invests may never be recognized by the broader market. Investing in equity stocks is risky and subject to the volatility of the markets. Ariel Fund often invests a significant portion of its assets in companies within the financial services and consumer discretionary sectors and its performance may suffer if these sectors underperform the overall stock market.


    Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes the reinvestment of dividends and capital gains and represents returns of the Investor Class shares. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the period ended June 30, 2014, the average annual total returns of Ariel Fund (Investor Class) for the 1-, 5- and 10-year periods were +29.50%, +24.25% and +7.54%, respectively. Ariel Fund’s Investor Class shares had an annual expense ratio of 1.03% for the year ended September 30, 2013. Performance data current to the most recent month-end for Ariel Fund may be obtained by visiting our website, arielinvestments.com.Investing in small- and mid-cap stocks is riskier and more volatile than investing in large-cap stocks. The intrinsic value of the stocks in which the portfolio invests may never be recognized by the broader market. Investing in equity stocks is risky and subject to the volatility of the markets. Ariel Fund often invests a significant portion of its assets in companies within the financial services and consumer discretionary sectors and its performance may suffer if these sectors underperform the overall stock market.

      


  • Guru Held Stocks Near Historical Low P/B

    Buying stocks at historically low price-to-book (P/B) ratios has been an effective strategy. The model portfolio, “Top 25 Historical Low P/B Ratio Companies”, has outperformed the S&P 500 by 25.44 percent since its inception in 2010. The following stocks are the most widely held stocks by the investing gurus we follow that are trading near their historical low P/B ratios:


    Kellogg Co (K) is trading at a low P/B ratio of 6.80, near its 10-year low of 5.92. The company is well-known for its cereal and offers other convenience foods. Some of the other brands it markets are Keebler, Cheez-It, Murray, Austin and Famous Amos. The stock is held by 17 gurus we follow with Hotchkis & Wiley holding the largest position of 2.43 million shares, representing 0.68 percent of the shares outstanding.

      


  • John Rogers Comments on Contango Oil & Gas Co

    Also, natural resources explorer Contango Oil & Gas Co. (MCF) slipped –11.37% after an earnings report that disappointed the Street. Specifically, the company’s first-quarter loss of $10 million was driven by $42 million in dry-hole (a well that produces no commercially viable oil and gas) costs from a Gulf of Mexico well. Investors focused heavily on that unfortunate news—which we see as an unlucky part of the business— rather than on the company’s otherwise solid numbers. We were quite encouraged that the company plans to shift its capital expenditures entirely onshore where dry-hole risks are much lower.

    From John Rogers (Trades, Portfolio)' Ariel Fund Second Quarter 2014 Commentary.  


  • John Rogers Comments on Charles River Laboratories Intl Inc

    Preclinical testing firm Charles River Laboratories Intl, Inc. (CRL) dropped –11.30% as mergers and acquisitions ramped up in the health-care sector. Health-care consolidations have been rising, the most prominent being a proposed $100 billion acquisition of Astra-Zeneca by Pfizer Inc. (PFE), and with mergers come the rationalization of research capabilities. The market tends to react swiftly and sharply to such events. We think such reactions are generally overblown, as the effects tend to be more short-term than long-term; as such we think Charles River has become a better bargain lately.

    From John Rogers (Trades, Portfolio)' Ariel Fund Second Quarter 2014 Commentary.  


  • John Rogers Comments on CBRE Group Inc

    In addition, global real estate company CBRE Group, Inc. (CBG) jumped +16.81% after a very strong quarterly earnings report. Its adjusted earnings per share were $0.25, $0.08 higher than expectations, on the basis of strong revenue overall and nearly across its units. The market seemed especially pleased that management saw more upside than downside for the rest of 2014.

    From John Rogers (Trades, Portfolio)' Ariel Fund Second Quarter 2014 Commentary.  


  • John Rogers Comments on US Silica Holdings Inc

    Industrial sand producer U.S. Silica Holdings, Inc. (SLCA) piled up a +45.60% return after a great earnings report. Recent results were solid, but the key takeaway from management’s comments was the comparison of the current environment to that of 2011 and 2012, when business boomed based on heavy demand. All along, we have viewed Silica as a cyclical business, so we expected it to improve along the way; by the same token, we do not think a great environment will persist forever.

    From John Rogers (Trades, Portfolio)' Ariel Fund Second Quarter 2014 Commentary.  


  • John Rogers' Ariel Fund Second Quarter 2014 Commentary

    Quarter Ended June 30, 2014


    After a slow start to the year, global equities accelerated in the second quarter of 2014. For the quarter, domestic large caps edged out mid caps and foreign equities—with small caps posting a solid but less dramatic quarterly gain. The pattern from the first quarter continued: a preference for yield-bearing investments and equities with a reputation for steadiness and fundamental strength. For instance, across Russell’s main smaller-cap value indexes (2000, 2500 and Midcap), the two top-performing sectors were utilities and energy. Along the same lines, in smaller- cap stocks value topped core, while growth underperformed. The pattern was not as pronounced abroad, where emerging markets stocks outpaced developed markets—with sagging China being a key exception. We had strong returns this quarter, as Ariel Fund gained +6.42%, beating the Russell 2500 Value Index’s +4.20% advance, as well as the +2.38% rise of the Russell 2000 Value Index.

      


  • John Rogers' Ariel Investments 2nd Quarter 2014 Commentary

    We will come right out and say it: this has been a strange year for the markets so far. In 2014, through mid-April, the S&P 500 Index took a bumpy trip to nowhere—or technically a +0.02% gain. Since then, however, it has returned +7.54%. According to the Wall Street Journal, the S&P 500 has also had 16 record closes in the second quarter of 2014, and its volatility has dropped to the lowest level since 2007. At this point in a bull market, you might expect record highs and low volatility to drive unencumbered exuberance, but not this time. On the one hand, the Investors Intelligence Advisors Sentiment Charts show 61% are bullish on the market and 16% are bearish, with the rest expecting a correction. On the other hand, market pundits continue to detect fear, skepticism and worse in market movements. One global strategist recently told Bloomberg Businessweek: “Classically, the market climbs a wall of worry. Now we’re having a wall of hatred.”


    A look at asset flows suggests what investors are doing, and what it might mean. When we examined 56 Morningstar mutual fund categories and find the biggest inflows in dollar and percentage terms in the first five months of 2014, some fairly clear patterns emerge.

      


  • John Rogers and RS Investments Top Guru Real Time Trades of the Week

    The following information is a highlight of the real-time guru activity we saw this week. To view more information on these gurus, check out their guru portfolios. The “Real Time Picks” reports the stock purchases and sells that Gurus have made within the prior two weeks. If a Guru makes a purchase or sell of a company in which they own a greater-than 5% stake, SEC regulations require them to report their transaction within two days. This week we saw notable increases and buys in Real Time activity from John Rogers (Trades, Portfolio) and RS Investment Management (Trades, Portfolio).

    John Rogers (Trades, Portfolio)  


  • Ariel Investments' John Rogers Discusses KKR, First American, Dun & Bradstreet



  • John Rogers' Ariel Investment Fund April Commentary

    At Ariel Investments, three qualities connect our various strategies: patience, focus and independent thinking. Our portfolios now stretch from micro-cap to large cap and range from deep value to traditional value to global, but the philosophy behind them inspires similar activity during market dislocations. That is, when stocks fall, whether across markets or within one of our portfolios, our portfolio managers and analysts get extra busy. As vigilant assessors of value, we gather information and crunch numbers to determine whether the price shifts reflect fundamental, long-term changes in what businesses are worth. If we determine gaps between price and value have widened, hence creating better investment opportunities, we will buy more shares of the companies that have been, in our view, unfairly punished.


    In the first four months of 2014 some areas of the market have gained in quite normal amounts. Large caps are up +2.56% at home and +2.31% in developed markets abroad, as measured by the S&P 500 and MSCI EAFE indexes, respectively. Smaller-cap U.S. stocks, however, have had a mixed year, with some small- and mid-cap indexes up and some down; the bellwether small-cap Russell 2000 Index has fallen –2.80%. Moreover, our portfolios in the micro-cap to mid-cap range have had negative returns in the first four months of the year. We think that has created opportunities for our managers, so this month, we wanted to describe the most significant stock purchases in our smaller-cap deep value and traditional value portfolios firm-wide.

      


  • John Rogers Comments on Laboratory Corp. of America Holdings

    We purchased a previous holding in our mid ca p fund, Laboratory Corp. of America Holdings (LH). LabCorp maintains a leading market position in an indust ry that continues to show promising growth potential du e to technological advances, aging demographics, health care cost containment, and preventative medicine. LabCorp maintains a solid balance sheet, generates a significant amount of free cash flow and has been returning value to shareholders through share repurchases. The company operates with an experienced management team that is conservative yet willing to take slight risks in order to grow the business long-term.

      


  • John Rogers Comments on International Game Technology

    Also, gaming manufacturer International Game Technology (IGT) returned –22.00% after a subpar earnings report. Its revenue and earnings per share both slid below consensus estimates. Specifically, revenues were 2% lower than Wall Street expected, while the (adjusted) EPS of $0.25 did not meet the $0.30 forecast. The miss came from weak regional gaming trends and higher-than-expected operating expenses. We think operating issues can be corrected and believe management is focused on the issue. In the meantime, we see light business as temporary and industry-wide— beyond IGT's control. We would be more concerned if the short-term results stemming fr om lost market share, for instance. Although there have been headwinds for this company, we remain optimistic over the long term.

      


  • John Rogers Comments on Coach Inc.

    A few of our holdings struggled at quarter end. Specialty retailing Coach, Inc. (COH) de clined –10.91% after missing expectations. The company reported EPS of $1.06 after making $1.23 per share last year. Consensus had been $1.11. The main culprit was lower traffic in retail stores. It has been a very difficult winter for many retailers, but for Coach the more important issue is its st yle turnaround. Stuart Vevers, the new creative director, has his first complete line appearing this spring and hitting stores next fall. As long- term investors, a six-month waiting period is not difficult, but obviously, Wall Street is less patient than we are. We believe the company will emerge with its brand largely intact, new products to captivate customers and better financial results to follow.

      


  • John Rogers Comments on Thermo Fisher Scientific Inc.

    In addition, scientific research specialist Thermo Fisher Scientific Inc. (TMO) returned +8.12% after a very solid earnings report. Its revenue was $3.5 billion, up 6% over the previous period, and its earnings per share was $1.43, significantly above the $1.37 cons ensus estimate. Its forecast for 2014 was even more positive : full-year revenue guidance was in the $16 billion-plus ra nge, smashing the $13 billion consensus estimate, and the low end of its EPS guidance was more than $0.40 higher than Wall Street's best guess. Our strategy with Thermo Fisher has been to look beyond the gloom and doom that has cast a dark cloud over the whole sector to see the potential for a bright future.

      


  • John Rogers Comments on JLL Inc.

    Several of our holdings posted strong returns this quarter. Real estate specialist JLL Inc. (JLL), previously known as Jones Lang LaSalle Inc., surged +15.73% due to a strong earnings report. Specifically, in late January the company reported better-than-expecte d (adjusted) earnings per share (EPS) of $3.33; the Street expected $3.09. Revenues topped forecasts, $1.5 billion rather than $1.3 billion. In addition, the company's operating results were boosted by solid investment sales, facility management services and momentum in leasing revenues. Moreover, management signaled continued improvemen ts across its businesses. The market is still applying a cautiously cyclical set of expectations to this firm, but we believe its gradual growth is more secular in nature.

      


  • Cheap Stocks from John Rogers of Ariel Investments



  • John Rogers' Ariel Appreciation Fund First Quarter 2014 Commentary

    Investing in mid-cap stocks is more risky and more volatile than investing in large cap stocks. The intrinsic value of the stocks in which the portfolio invests may never be recognized by the broader market. Investing in equity stocks is risky and subject to the volatility of the markets. Ariel Appreciation Fund often invests a significant portion of its assets in companies within the financial services and consumer discretionary sectors and its performance may suffer if these sectors underperform the overall stock market.


    Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes the reinvestment of dividends and capital gains and represents returns of the Investor Class shares. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the period ended March 31, 2014, the average annual total returns of Ariel Appreciation Fund (Investor Class) for the one-, five- and ten-year periods were +25.33%, +28.77% and +8.55%, respectively. The Fund's Investor Class shares had an annual expense ratio of 1.13% for the year ended September 30, 2013. Performance data current to the most recent month-end for Ariel Appreciation Fund may be obtained by visiting our web site, arielinvestments.com.

      


  • Ariel Fund First Quarter 2014 Commentary

    Investing in small and mid-cap stocks is more risky and more volatile than investing in large cap stocks. The intrinsic value of the stocks in which the portfolio invests may never be recognized by the broader market. Investing in equity stocks is risky and subject to the volatility of the markets. Ariel Fund often invests a significant portion of its assets in companies within the financial services and consumer discretionary sectors and its performance may suffer if these sectors underperform the overall stock market.


    Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes the reinvestment of dividends and capital gains and represents returns of the Investor Class shares. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the period ended March 31, 2014, the average annual total returns of Ariel Fund (Investor Class) for the one-, five- and ten-year periods were +23.74%, +30.25% and +7.37%, respectively. Ariel Fund's Investor Class shares had an annual expense ratio of 1.03% for the year ended September 30, 2013. Performance data current to the most recent month-end for Ariel Fund may be obtained by visiting our web site, arielinvestments.com.

      


  • John Rogers' Ariel Funds March Commentary

    Plenty of people talk about "endpoint sensitivity," but oftentimes they miss half the story. That is, in a data series there are really two endpoints—the last one and the first one. As standardized one-year, three-year, and five-year periods roll along, people focus great attention on the most recent month and tend to forget about the month that "goes away." Making this mistake in 2014 could prove harmful when examining five-year returns.


    Below are some recent returns for Ariel Fund. One reason we have selected our flagship mutual fund for this illustration is because its relative performance recently has been quite stable. Over the five years ended February 28th, 2014, it was the top-performing fund in Morningstar's Mid-Cap Blend category. It remained on top for the five-year period as of March 31* . At first glance, however, its absolute returns look like they changed a lot in one month:

      


  • Goldman Sachs Is a Sell According to DDM Model

    The Goldman Sachs Group Inc. (NYSE:GS) is one of the world's leading investment banking and securities companies. Its P/E ratio indicates that the stock is relatively undervalued (10.3 versus the 20.5 industry mean). So now let's take a look at the intrinsic value of this company and try to explain to investors the reasons it is a good buy or not.


    In this article, we present a model that is by no means the be-all and end-all for valuation. The purpose is to force investors to evaluate different assumptions about growth and future prospects.

      


  • Different Opinions on Bio-Rad Laboratories

    Bio-Rad Laboratories Inc. (NYSE:BIO) is a manufacturer and distributor of its own life science research and clinical diagnostics products. The company has two primary segments: Life Science and Clinical Diagnostics. The company sells its products and services to a diverse client base comprised of scientific research, healthcare, education and government customers.


    Let's take a look at this company and try to explain to investors the reasons this is an apparently appealing investment.

      


  • John Rogers' Ariel Investments February Commentary

    In the investing world, the worst of times can be the best of times to buy. The markets provided that lesson once again to investors over the last five years. A half-decade ago, with panic at generational highs and expectations near all-time lows, the market bottomed on March 9, 2009. As a result, the five-year results you see ending February 28, 2014 are likely the best month-end returns you will see for a long time. Before we get to those numbers, however, we would like to look back at our view exactly five years ago in the February 2009 commentary.


    Recall that neither we nor anyone could "call the bottom" back then. Indeed, looking straight into the rearview mirror, the financial press was doing close to the opposite, "reporting extensively about the so-called 'lost decade.'" The prevailing notion was that the negative 10-year return for the stock market shattered the status of stocks as a good long-term investment. We noted, however, that "[s]ince the beginning of 1929, the stock market has had negative 10-year returns at month-end only 9% of the time, and only 5% of the time after the Great Depression's damage." Moreover, these "lost" decades tended to be closer to market bottoms than signposts on the way to further losses: We noted that buying "at the end of a difficult 10-year stretch, even if the economy is in poor shape, tends to yield good results rather than bad ones." We used the strong decade-long periods immediately succeeding the negative 10-year returns from December 1974 and August 1982 to make the point. We ended with our core conclusion: "History tells us, however, this is the time to shove fear in the closet, think rationally, and ponder the next 10 years rather than the ten that just ended."

      


  • Ariel Investments' John Rogers Recommends Stocks

    Value investor John Rogers (Trades, Portfolio) recommends JM Smucker (NYSE:SJM), Bally Tech (BYI) and Lazard (NYSE:LAZ).
      


  • John Rogers' Ariel Fund Comments on Roche

    Roche (XSWX:RO)'s story is different, and even more provocative. Its revenue growth has been quite steady, shifting only slightly from 9% in the 1991 to 2005 period down to 8% in the 2005 to 2012 period. Its earnings and P/E multiple, however, have been more jumpy throughout the multi-decade period, largely because Roche has had negative earnings years such as 1997 and 2002. Still, there is a very clear drop in sentiment in the recent period not reflected in fundamental results. That is, in 2005 Roche earned $1.37 per share, rising to $3.02 per share last year—a growth rate of +11.9% annually— without any negative earnings years. The recent steady growth is far better, we think, than the volatile rise of 3 +9.8% per year from 1991 to 2005. And yet the market chopped Roche's P/E ratio in half, from 27.3x in 2005 to 13.6x in 2011 (before it recovered a bit recently).


    What we see, then, is two companies with very long, strong track records before one even considers any details about the businesses—and both stocks are much cheaper than they have been historically. That prompted us to investigate, and when we dove deeply we got even more interested...

      


  • Ariel International Fund & Ariel Global Fund - Healthy Ideas

    Dear Fellow Shareholder: As you know, stocks continued a massive global rally this quarter. So we are happy to report a quarter of strong absolute performance and solid relative results. During the quarter, Ariel International Fund gained +11.03%, versus the MSCI EAFE Index, which returned +11.61%. Additionally, Ariel Global Fund rose +8.49%, topping the MSCI ACWI Index, which advanced +8.02%.


    For the one-year period ending September 30, 2013, Ariel International Fund returned +28.11% versus +24.29% for the MSCI EAFE Index. Over the same period, Ariel Global Fund advanced +28.84% compared to the MSCI ACWI Index, which gained +18.37%. For both funds, the top contributing sector was information technology, while the top detracting sector was telecommunication services. For Ariel International Fund, on a stock specific basis, top contributors were Nokia Corp. and Roche Holding AG, gaining +158.31% and +49.23%, respectively. Detractors included NTT DoComo, Inc. and Nintendo Co., Ltd., sliding -2.20% and -9.83%, respectively. Top contributors for Ariel Global Fund were Nokia Corp. and Gilead Sciences, Inc. returning +155.49% and +89.48%, respectively. Detractors included NTT DoComo, Inc., returning -5.47%, and Mobistar SA, falling -19.63%, respectively. Turning to philosophy and process, as we have mentioned before, we are true bottom-up stock pickers, but oftentimes market pressures bearing down on an area cause us to dive into that part of the market to find bargains. In our second-quarter 2013 letter, we explored how this tactic drove a significant weighting in Japanese stocks that worked very well and quite quickly. Mind you, we did not "bet" on Japan, but rather used the market's pessimism toward its overall economy in order to initiate positions in thriving multinationals that happened to be headquartered in Japan.

      


  • John Rogers Comments on Brooks Automation Inc.

    Brooks Automation, Inc. (BRKS) — Based outside of Boston, Brooks produces semiconductor manufacturing equipment, and has recently expanded into the life sciences area. The company has a leadership position in tool automation for semiconductor makers. The company has a pristine balance sheet with excess cash, solid leadership under CEO Steve Schwartz, and currently trades for roughly its book value.

      


  • John Rogers Comments on Superior Industries Intl Inc.

    Superior Industries Intl Inc. (SUP) — Los Angeles-based Superior is the leading wheel supplier to the North American auto industry. The company is solidly profitable, pays a dividend yielding over 4%, and has attractive long-term growth prospects if it is able to effectively increase its capacity. Yet the stock trades below book value, with no debt and significant excess cash.

      


  • John Rogers Comments on RealNetworks Inc.

    RealNetworks, Inc. (RNWK) — Based in Seattle, RealNetworks is best known for its RealPlayer media player software. The company has struggled in recent years, but we were attracted by the return of founder Rob Glaser to a company trading barely above its net cash and below our estimate of liquidation value. Since our initial purchase, the company has introduced RealPlayer Cloud, which along with other new products makes us confident that Mr. Glaser is likely to lead a successful turnaround.

      


  • John Rogers Comments on Vical

    Vical (VICL)


    We typically use these letters to discuss our approach to deep value investing, to outline the case for our favorite stocks, or to comment on trends in the market which we believe will affect our portfolio holdings. This quarter, however, we will share the story of a stock we have held for more than a decade which, at first glance, appears to have "blown up." We want to explain why we have owned it, how our valuation work continues to indicate a bargain within our long-term discipline, and how we will evaluate the company going forward. Most importantly, we want to demonstrate why we think the company is on solid footing and continues to provide a great long-term investment opportunity. On Monday, August 12 th , after announcing that the Phase III trial of its Allovectin compound, a metastatic melanoma therapy, had failed, Vical stock dropped by 57%. Specifically, it did not meet either the primary endpoint of objective response rate or the secondary goal of overall survival. This result obviously disappointed the company, shareholders, and, most of all, cancer patients. Many had hoped this immunotherapy compound would revolutionize treatment for those battling this terrible disease. Although we would have preferred a better outcome on Allovectin, our thesis for Vical was not a simple bet on its success. In our analysis, the company's infectious disease platform – with multiple promising products – was worth well more than the $240 million enterprise value of Vical just prior to the announcement. We continue to believe that is the case. All along, we knew a Phase III failure for Allovectin would lead to a s h or t- term hit to the stock, but we believed in the long-term, Vical was an undervalued infectious disease company. To us, Allovectin represented a free option on a cancer treatment with enormous upside potential. This option proved to be of no value, but our view on the rest of the company has not changed.

      


  • John Rogers' Ariel Discovery Fund - The DNA of Vical

    Dear Fellow Shareholder: This was a disappointing quarter for Ariel Discovery Fund, as our return of +2.47% lagged the +7.59% return of the Russell 2000 Value Index and the +5.24% gain of the S&P 500 Index. Year-to-date, Ariel Discovery Fund has returned +19.67%, as compared to +23.07% for the Russell 2000 Value and +19.79% for the S&P 500 Index. We continue to trail the benchmark since inception due to a tough launch, but even with this tough quarter our two-year annual return of +27.18% is respectable compared to the Russell 2000 Value Index and the S&P 500 Index.


    Top performers during the quarter were Furmanite Corp. (FRM), which gained +47.98%; Emergent BioSolutions Inc. (EBS), up +32.11%; and Gulf Island Fabrication, Inc. (GIFI), which returned +28.51%. On the downside were Vical Inc. (NASDAQ:VICL), losing -60.38%; JAKKS Pacific, Inc. ( JAKK), down -40.71% before it was sold, and Pendrell Corp. (PCO), which fell by -25.67% (although it remains up +52.67% year-to- date). Vical is discussed in detail below.

      


  • Ariel Investments' John Rogers Comments on Janus Capital Group Inc.

    Asset manager Janus Capital Group Inc. (JNS) soared +46.37% on better-than-expected earnings and revenue. Specifically, in October the company reported quarterly earnings of $0.18 per share versus consensus of $0.17. Its assets under management (AUM) rose to $166.7 billion, from $158.2 billion a year ago. The company’s cash investments totaled $793 million versus $543 million in debt, giving it a positive $250 million net cash position. Finally, Janus repurchased more than one million shares of its own stock. Clearly, the roaring 2013 stock market had a good deal to do with the positive news that caught Wall Street’s attention. For our part, we were more interested in the capital allocation decisions because those are under management’s control.

    From John Rogers (Trades, Portfolio)' Ariel Investments fourth quarter 2013 commentary.  


  • Ariel Investments' John Rogers Comments on Lazard Ltd.

    In addition, restructuring specialist and asset manager Lazard Ltd (LAZ) surged +27.36%, topping estimates for earnings and revenue by a significant margin. Its earnings per share for the third quarter were $0.46 versus the estimate of $0.37. The company’s operating revenue was $489 million, well above the $452 million expectation. Its September 30 AUM reached $176 billion, an all-time high to that date. We closely watch that figure, because we think it is an overlooked part of the business. Meanwhile, the global leading restructuring business had $42 million in revenue, 23% higher than a year ago. Still, restructurings continue to be well below the usual rate, leading us to believe the future is even brighter..

    From John Rogers (Trades, Portfolio)' Ariel Investments fourth quarter 2013 commentary.  


  • Ariel Investments' John Rogers Comments on Western Union Co.

    Also, transaction specialist Western Union Co. (WU) returned –6.85% due to disappointing guidance. Its quarterly earnings report was solid, with earnings and revenues both above consensus. At the same time, however, the company signaled that costs for regulatory and compliance investments would be higher than expected. As a result, management expects operating profit to be flat next year, and share buybacks will be minimal. Management had been returning capital to shareowners at a steady clip: Through the first three quarters of 2013, the company returned nearly $550 million to shareholders through dividends and buybacks. Admittedly Western Union has had a difficult couple of years, but we think its economic moati is firmly in place, even though most analysts seem to be looking right past it.

    From John Rogers (Trades, Portfolio)' Ariel Investments fourth quarter 2013 commentary.  


  • Ariel Investments' John Rogers Comments on International Game Technology

    A few of our holdings struggled in the third quarter. Gaming equipment specialist International Game Technology (IGT) slipped –3.46% due to a disappointing earnings report. Although revenues exceeded expectations by a solid margin, EPS of $0.30 fell short of the consensus $0.34 figure. The environment was more competitive than expected, leading to fewer of IGT’s games on the floor, as well as a corresponding decline in overall play. Still, the company is allocating capital smartly. It announced a $200 million share repurchase plan, which would retire roughly 4% of the shares outstanding. We continue to think that although gaming has been softer than expected in the ongoing recovery, eventually it will pick up.


    From John Rogers (Trades, Portfolio)' Ariel Investments fourth quarter 2013 commentary.

      


  • John Rogers' Ariel Investments Q4 2013 Commentary

    Investing in small and mid-cap stocks is more risky and more volatile than investing in large cap stocks. Ariel Fund often invests a significant portion of its assets in companies within the financial services and consumer discretionary sectors and its performance may suffer if these sectors underperform the overall stock market. Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes the reinvestment of dividends and capital gains and represents returns of the Investor Class shares. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the period ended December 31, 2013, the average annual total returns of Ariel Fund (Investor Class) for the one-, five- and ten-year periods were +44.68%, +26.01% and +8.18%, respectively. Ariel Fund’s Investor Class shares had an annual expense ratio of 1.03% for the year ended September 30, 2013 and 1.06% for the year ended September 30, 2012. Performance data current to the most recent month-end for Ariel Fund may be obtained by visiting our web site, arielinvestments.com.


    Both domestic and international stocks had strong returns in 2013, including the final quarter of the year. Somewhat predictably, the investment areas that were the most popular over the last half decade— bonds and emerging market stocks—had their comeuppance with negative returns for the year. And although investors were generally skeptical of developed market equities, here and overseas, most broad indices were up between +20% and +35%— well above the low double-digit historical averages. As independent thinkers, we entered the year bullish, viewing the global recovery from the financial crisis as ongoing and believing the pessimism overdone. We had good returns this quarter as Ariel Fund gained +12.99%, beating the Russell 2500 Value Index’s +8.83% jump, as well as the +9.30% rise of the Russell 2000 Value Index.

      


  • Ariel Investments' John Rogers Comments on January

    The big investment buzz a year ago was the so-called "Great Rotation," an expected shift out of bonds and into equities. In response, we devoted our January 2013 commentary to mutual fund flows, and while we were unsure whether the phenomenon would become a trend, we were clear that we saw the possibility as "a return to familiar ground." That is, from 2008-2012, investors changed their traditional patterns of behavior, evidently in reaction to the sharp equity losses in the 2007-2009 bear market. Last year, we wrote:


    In order of magnitude, the three shifts we have seen lately have been a massive preference for bonds over stocks, a huge swing from actively managed equity portfolios to passive ones and a much greater fondness for funds with stellar short-term performance.

      


  • Guru Stocks at 52-Week Lows: CHL, T, CAJ, CVE, KYO

    According to GuruFocus list of 52-week lows, these Guru stocks have reached their 52-week lows.


    China Mobile Ltd. (NYSE:CHL) Reached the 52-Week Low of $48.23

      


  • Ariel Investments and Causeway Capital Analysts Discuss Microsoft Stock



  • Guru Stocks at 52-Week Lows: CHL, IBM, PTR, T, PM

    According to GuruFocus list of 52-week lows, these Guru stocks have reached their 52-week lows.


    China Mobile Ltd. (NYSE:CHL) Reached the 52-Week Low of $48.48

      


  • John Rogers' Ariel Investments Commentary on December

    Equities of almost all descriptions had a stellar 2013, defying the widespread skepticism that marked the beginning of the year.  Predictably, investors’ enthusiasm grew as stocks climbed.  Although we do not expect returns in 2014 to match those in 2013, we remain cautiously optimistic.   


    Last year, we began providing a five-year performance overview as the centerpiece of our December commentary.  The picture today is very different from that of a year ago, even though four of the calendar years in our snapshot remain the same.  Replacing the awful equity losses from 2008 with the fantastic stock gains from 2013 alters the landscape substantially, on paper and in investors’ minds.

      


  • John Rogers Comments on Silica Holdings Inc.

    Second is U.S. Silica Holdings Inc. (NYSE:SLCA), which provides silica—industrial grade sand—chiefly to energy companies; we own it in Ariel Fund as well as our small cap separate account. When many look quickly at the company, they see a straightforward supplier of a pure commodity product, which therefore has no barrier to entry from competition. We believe, on the other hand, that Silica has a substantial competitive advantage due to its top-notch distribution network and its low costs. Two thirds of its customers are oil and gas producers and another third are industrial companies. In both cases, Silica’s customers need continual supplies of industrial sand or else they must idle their operations, costing a significant amount of time and money. In addition, Silica has 75% of its volume under contract, with an average weighted contract life of two years. In our view, Silica’s customers are highly unlikely to simply switch providers based on price.  


  • John Rogers Comments on Bristow Group Inc.

    First comes Bristow Group Inc. (NYSE:BRS), which provides helicopter services to offshore energy rigs, and is a holding in our traditional mid-cap, small-to-mid cap, and small-cap portfolios. Although energy exploration and production can clearly fluctuate, Bristow offsets those shifts through long-term contracts lasting roughly three to five years. Furthermore, Bristow receives “monthly standing charges”—meaning it gets paid whether its helicopters fly or not—amounting to 70% of its operating income.

    From John Rogers' November 2013 commentary.  


  • John Rogers Comments on Contango Oil & Gas Co.

    The most straightforward such example is Contango Oil & Gas Co. (MCF), which we own in our traditional mid-cap, small-to-mid cap, and small-cap portfolios, as well as in our deep value small cap portfolios. When we first purchased it in 2011, it focused exclusively on shallow-water Gulf of Mexico exploration and production, had an amazingly low-cost operation, virtually no debt, and thus very high cash flow. It was also quite disciplined in drilling only high opportunity locations. Since then the company has unfortunately seen its CEO and Founder, Ken Peak, depart for health reasons and later die. Moreover, it undertook a transformational acquisition, purchasing Crimson Exploration, which had become financially distressed. Its opportunities have now multiplied. And while its leverage has increased somewhat, the company continues to boast relatively low costs, minimal debt, and disciplined exploration. Across our domestic equity portfolios, we own several other companies whose profiles fit this mold.

    From John Rogers' November 2013 commentary.  


  • John Rogers' Ariel Investments Monthly Commentary - November

    During the long 2002-2007 bull market, and especially in its final months, we received many questions and plenty of suggestions regarding our stance on energy stocks. As you know, energy stocks and commodities were red-hot during much of that cyclical, relatively low-quality stock surge, and we had little exposure to the area in our domestic stock portfolios. For a long time, we held a belief that energy companies were largely dependent on natural resource prices—which makes it difficult to build and defend the durable competitive advantage we seek. Besides, with the prices of those commodities and stocks so rich, there was not much value at hand. It is worth noting that as commodities became inflated, we spent an enormous amount of time studying the sector and its effect on our holdings.

    Fast forward to 2013 and we have a number of energy companies in our portfolios. This is true because we shifted our perspective as well as our expertise. Indeed, our view on the space evolved as we started to discover potential opportunities that we can describe in two categories. First, we now think some energy companies can overcome their direct exposure to energy commodities through differentiated business models. Second, we believe some energy-related enterprises’ cash flows are far less volatile than natural resource prices. After we began finding opportunities, we also hired Anthony Walker, a research analyst with deep expertise in the energy sector. Now, among our domestic portfolios, we own a dozen energy and energy-related companies.  


  • John Rogers Adds to Perceptron and CPI Aerostructures

    As reported by the GuruFocus Real Time Picks, John Rogers increased his holdings in two companies on Nov. 30. The guru made notable increases to his holdings in the technology-based CPI Aerostructures (CVU) and Perceptron (PRCP).

    John Rogers is the Founder, Chairman, CEO and CIO of Ariel Capital Management. Rogers manages Ariel’s small and mid-cap institutional portfolios as well as the Ariel Fund (ARGFX) and Ariel Appreciation Fund (CAAPX). The guru focuses his investment selections on small and medium-sized companies whose share prices are undervalued, and his fund seeks to purchase companies whose prospects include high barriers to entry, sustainable competitive advantages, and predictable fundamentals that allow for double-digit cash earnings growth.  


  • Ariel Capital's John Rogers Trims Sotheby’s, DeVry, Hospira, IPG, Others

    Chicago-based Ariel Capital Management is led by Guru John Rogers who has earned a number of monikers, including “master wealth builder,” "the turtle” and “The Patient Investor,” after his column by the same name. He is also listed in a new book, “The World’s 99 Greatest Investors: the Secret of Success,” by Magnus Angenfelt.

    The portfolio of John Rogers currently lists 173 stocks, 29 of them new, with a total value of $6.86 billion and a quarter-over-quarter turnover of 8%. The portfolio’s top sector weightings are consumer cyclical at 24.6%, financial services at 22.8% and industrials at 19.3%. John Rogers is averaging a 12-month return of 19.34%. In 2012, Ariel Fund returned 20.32% compared to the S&P’s 15.4%.  


  • Ariel Investment's Charles Bobrinskoy - Higher Interest Rates Will Be Challenging for Market

    Ariel Investment's Director of Research Charles Bobrinskoy discusses the Fed's eventual taper and the effect it will have on the market:

      


  • Aflac Announces Increased Share Repurchases and Boosts Dividends

    Aflac (AFL), one of the largest insurers and most familiar brands in American insurance, enhanced its financial reputation this week by increasing its dividend and announcing that it would be spending more on stock repurchases in the near future.

    Aflac, commonly known for its duck spokesperson and funny advertisements, is an American and Japanese insurance company based out of Columbus, Ga. Aflac’s primary function is that of a general business holding and management company which oversees the operations of its subsidiaries by providing management services and making capital available.  


  • John Rogers Comments on MTS Systems Corp.

    During the quarter, we initiated one position and exited two positions in Ariel Fund. We added MTS Systems Corp. (NASDAQ:MTSC), which specializes in physical testing equipment. It occupies a key, important niche for manufacturing firms that are doing more and more virtual testing. In our view, companies are unlikely to abandon real-world physical tests; that stance is a contrarian one in a world where many believe virtual testing will eventually completely take over. In addition to significant potential growth, it boasts good operating margins, a sturdy balance sheet, and remains a very trusted brand.

    From John Rogers' Ariel Fund and Ariel Appreciate Fund portfolio manager letter third quarter 2013.  


  • John Rogers Comments on Gannett Co.

    In contrast to our financial names, one of our best performers during the quarter was a name many challenged in the not-so-distant past. As many know, although our media names fall squarely within our circle of competence as evidenced by our deep expertise in the industry, they represented some of our poorest performing and most controversial holdings during the worst of the financial crisis. During that tough period, we re-examined every position with a fresh perspective that required us to consider each stock from a lens of having never owned it. In the case of Gannett Co., Inc. (GCI), despite its underperformance, we still saw tremendous value and, true to our contrarian leanings, doubled and tripled down on the holding as the price became more and more attractive—making the stock one of our largest positions. It is important to note, after taking some lumps, we eliminated other media names whose brands and franchises did not appear to be nearly as compelling over the long-term.

    On June 13th, Gannett agreed to acquire Belo Corporation (BLC) and its 20 television stations that reach more than 14 percent of U.S. television households in a $2.2 billion transaction. The New York Times dubbed it, "…the biggest local television station sale in more than a decade."2 The acquisition will nearly double Gannett's broadcast properties (from 23 to 43) and create the fourth-largest owner of major network affiliates reaching nearly one-third of all U.S. television households. Gannett will have 21 stations in the top 25 markets and will become the second largest owner of network-affiliated television stations. While normally skeptical and wary of acquisitions, we immediately saw the value of this transaction and future possibilities for Gannett Investors also applauded the deal as evidenced by the fact that Gannett's stock closed +34% higher on the day of the announcement while Belo shares increased +28%. The reason being, Belo will not only accelerate Gannett's transformation into a diversified media company with higher profitability and returns—it will also give Gannett more leverage when negotiating the valuable retransmission fees local television stations receive from cable and satellite operators in exchange for the right to carry those stations on their systems. Size matters when seeking higher retransmission fees with cable and satellite distributors and also when bargaining with the broadcast networks for their cut of that revenue. Retransmission revenues create a dual revenue stream for Gannett, similar to cable networks, while reducing cyclicality from what has historically been an advertising-only business model. And whereas advertising can be hard to forecast, contractual agreements make retransmission revenues predictable and sticky. Moreover, we anticipate a meaningful increase in these revenues once broadcast network compensation becomes more aligned with their ratings.  


  • John Rogers Comments on Janus

    Lastly, Janus (NYSE:JNS)—whose ongoing challenges have tested even our patience—represents the most contrarian name in our entire portfolio as measured by the large number of Wall Street analysts who have a sell rating on the stock. An undesirable trifecta of weak investment results, the negative impact from performance-based fees and net outflows largely isolated to three of its well-known mutual funds have created a perfect storm for this $162 billion asset manager. In our view, the bad news is more than priced in. By our calculation, performance fees have bottomed. Moreover, the company's balance sheet continues to strengthen and outflows should stabilize once returns improve.

    From John Rogers' Ariel Fund and Ariel Appreciate Fund portfolio manager letter third quarter 2013.  


  • John Rogers Comments on First American Financial

    Rising mortgage rates drove down First American Financial (NYSE:FAF)'s stock price as Wall Street investors feared an end to the refinancing boom. Over the near-term, we anticipate downward earnings revisions as refinancings come to a halt rather quickly and new home sales take time to ramp up. But looking further out, we know title insurance policies on new home purchases are twice as profitable as refinancings which will drive earnings at First American. Not to mention, with the stock trading at just 10x consensus earnings, our bullishness is only magnified by the stock's incredibly cheap valuation.

    From John Rogers' Ariel Fund and Ariel Appreciate Fund portfolio manager letter third quarter 2013.  


  • John Rogers Comments on Lazard Ltd.

    With Lazard (NYSE:LAZ), we are able to look beyond the negatively-impacted emerging markets stocks held by the firm's investment management business. We like the enduring economics of money management and treat this meaningful profit contributor as icing on the cake of the company's diversified investment banking operation.

    From John Rogers' Ariel Fund and Ariel Appreciate Fund portfolio manager letter third quarter 2013.  


  • John Rogers' Ariel Fund and Ariel Appreciate Fund Portfolio Manager Letter

    Dear Fellow Shareholder: For the second quarter ending June 30, 2013, Ariel Fund rose +1.69% versus +1.54% for the Russell 2500 Value Index and +2.47% for the Russell 2000 Value Index. Meanwhile, Ariel Appreciation Fund earned +4.35% during the three-month period versus a +1.65% return for the Russell Midcap Value Index and +2.21% gain for the Russell Midcap Index. As a means of comparison, the broad market, as measured by the S&P 500 Index earned +2.91% during the three-month period. For the first six months of this year, Ariel Fund returned +17.71% versus +15.10% for the Russell 2500 Value Index and +14.39% for the Russell 2000 Value Index. Meanwhile, Ariel Appreciation Fund earned +20.58% during the six-month period versus a +16.10% return for the Russell Midcap Value Index and +15.45% gain for the Russell Midcap Index. By comparison, the year-to-date return for the S&P 500 Index was +13.82%.

    The Fed Factor  


  • John Rogers' Ariel Funds Third Quarter 2013 Commentary

    Investing in small and mid-cap stocks is more risky and more volatile than investing in large cap stocks. Ariel Fund often invests a significant portion of its assets in companies within the financial services and consumer discretionary sectors and its performance may suffer if these sectors underperform the overall stock market. Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes the reinvestment of dividends and capital gains and represents returns of the Investor Class shares. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the period ended September 30, 2013, the average annual total returns of Ariel Fund (Investor Class) for the one-, five- and ten-year periods were +33.28%, +13.07% and +7.94%, respectively. Ariel Fund's Investor Class shares had an annual expense ratio of 1.06% for the year ended September 30, 2012. Performance data current to the most recent month-end for Ariel Fund may be obtained by visiting our web site, arielinvestments.com.

    The third quarter of 2013 goes in the books as yet another strong one. Specifically, the global MSCI ACWI Index showed gains of +8.02%, while in the U.S. the S&P 500 Index rose +5.24%. That brings the year-to-date totals to +14.92% and +19.79%, respectively—a very strong year by any measure. As noted in The Wall Street Journal, quarterly gains have been strong for some time but without being abnormal. For the S&P 500 Index, 14 of the past 18 quarters have had positive returns, and the same is true of the MSCI ACWI Index. Such trajectories are not unusual. For instance, during the 1990s bull market and the 2002-2007 surge, the U.S. market actually had an even higher ratio of rising quarters. Altogether this pattern tells us the flip-side of the "slow recovery" coin has been a nice, long string of solid quarterly stock market gains and an economy that seems neither weak nor overheated. We experienced solid gains this quarter as Ariel Fund rose +8.78%, beating the Russell 2500 Value Index's +6.43% jump, as well as the +7.59% rise of the Russell 2000 Value Index.  


  • John Rogers Comments on U.S. Silica Holdings Inc.

    During the quarter, we initiated a position in U.S. Silica Holdings Inc. (SLCA), a supplier of industrial-grade sand to the oil and gas markets. Silica (the technical name for this sand) is critical in the process of hydraulic fracturing, and in our view, mastering the logistics and transportation of this commodity constitutes a durable competitive advantage. We believe the market is underestimating the likely pace of growth in U.S. Silica's revenue and earnings over the next several years (as demand continues to meaningfully increase), as well as the attractive cash flow characteristics of the company's business.

    From John Rogers' Ariel Funds third quarter 2013 commentary.  


  • John Rogers Comments on Nordstrom Inc.

    Also, premier department store Nordstrom, Inc. (JWN) returned -5.74% due to slow sales and a scaled-back outlook. Its EPS of $0.93 actually exceeded the $0.88 consensus earnings expectation. Still, management noted the "softer than anticipated" sales trends and lowered its EPS guidance from the $3.65 to the $3.80 range to between $3.60 to $3.70. We strongly agree with management that the phenomenon is cyclical and short-term rather than a long-term issue. The company continues to stand out for its great brand, phenomenal customer service, energetic growth in its Nordstrom Rack stores, and so forth. Long-term we think most department stores are positioned to struggle, but Nordstrom is poised to thrive.

    From John Rogers' Ariel Fund third quarter 2013 commentary.  


  • John Rogers Comments on Jones Lang LaSalle

    A few of our holdings struggled in the third quarter. Real estate specialist Jones Lang LaSalle Inc. (JLL) fell -4.21% due to an earnings miss. Revenues came in near expectations, at $989 million—an increase of 7% year-over-year—versus the consensus of $995 million. Management suggested the bulk of the earnings miss came from higher-than-expected expenses. Adding to the Wall Street discontent was a lower forecast for the Americas in investment sales activity: growth of 10% to 15% rather than 15% to 20%. We see all these as minor, short-term issues and think the long-term picture is bright. People will always buy and sell corporate real estate, and the trend toward outsourcing real estate management is straightforward and rational. We plan to remain patient.

    From John Rogers' Ariel Funds third quarter 2013 commentary.  


  • John Rogers Ariel Fund Third Quarter Commentary

    Investing in small and mid-cap stocks is more risky and more volatile than investing in large cap stocks. Ariel Fund often invests a significant portion of its assets in companies within the financial services and consumer discretionary sectors and its performance may suffer if these sectors underperform the overall stock market. Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes the reinvestment of dividends and capital gains and represents returns of the Investor Class shares. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the period ended September 30, 2013, the average annual total returns of Ariel Fund (Investor Class) for the one-, five- and ten-year periods were +33.28%, +13.07% and +7.94%, respectively. Ariel Fund's Investor Class shares had an annual expense ratio of 1.06% for the year ended September 30, 2012. Performance data current to the most recent month-end for Ariel Fund may be obtained by visiting our web site, arielinvestments.com.Inc. 0.0%; Sotheby's 1.8%; Jones Lang LaSalle Inc. 3.5%; Nordstrom, Inc. 0.7% and U.S. Silica Holdings Inc. 1.6%. Portfolio holdings are subject to change. The performance of any single portfolio holding is no indication of the performance of other portfolio holdings of Ariel Fund.

    The Russell 2500™ Value Index measures the performance of the small to mid-cap value segment of the U.S. equity universe. It includes those Russell 2500 companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000® Value Index measures the performance of the smallcap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Russell® is a trademark of Russell Investment Group, which is the source and owner of the Russell Indexes' trademarks, service marks and copyrights.  


  • John Rogers' Ariel Funds September Commentary

    Although it may be hard to believe, the crash of Fall 2008 was a half-decade ago. At the time, the market was signaling the U.S., and therefore the world, was on the precipice of financial disaster. With that in mind, we read through our writings from that time to see what message they have for us now. The first thing we noticed: as is often the case, the realities of the present shape our memories of the past. Specifically, because we did not go over the edge and did in fact achieve stability, most people today take that outcome as a foregone conclusion. So the commentariat has the luxury of pointing toward mistakes rather than appreciating the achievements of that period; we think a far more balanced view is wise. We also noticed that even amidst such turbulence and carnage, it was possible to look past the particulars and see the big picture. That lesson remains important today. September 2008 was a month of tremendous upheaval with many, many moving parts. Today, however, conventional wisdom boils it down to one event—the "mistake" that Lehman was allowed to go bankrupt. That summary strikes us as Monday-morning quarterbacking. In the quarterly commentary from September 30, 2008 we wrote:

    [quote]The market volatility, velocity of change, and scale of transformation we experienced in September 2008 were unprecedented. . . . . Still, we would argue the fundamental metamorphosis of the financial services industry was far more important and nerve-wracking. Of the 25 largest publicly-traded U.S. financial services companies this time last year, nine of them underwent radical transformations in September 2008. The government took control of Fannie Mae (FNM), Freddie Mac (FRE), and AIG (NYSE:AIG). Lehman Brothers was not so lucky, declaring bankruptcy. Merrill Lynch (MER), Washington Mutual, and Wachovia (NASDAQ:WB) all sold themselves at distressed prices. Finally, Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) became bank holding companies in order to avoid ending up like Merrill or Lehman. The financial world has already changed radically and will take more time to stabilize.  


  • Buffett Highlights the GuruFocus Real Time Picks Update

    The following information is a highlight of the real-time guru activity we saw this week. To view more information on these gurus, check out their guru portfolios. “Real Time Picks” reports the stock purchases and sells that Gurus have made within the prior two weeks. If a Guru makes a purchase or sell of a company in which they own a greater-than 5% stake, SEC regulations require them to report their transaction within two days. We saw notable real time activity from Warren Buffett, Mason Hawkins and John Rogers.

    Warren Buffett
      


  • Two Gurus Reduce Two Challenged Companies

    Both CSP Inc. (CPSI) and ITT Educational Services Inc. (ESI) have struggled in the last year. Their revenues are way down as of the second quarter, year over year. Richard Blum’s Blum Capital Partners LP continues to trim sinking education companies where the company is 10% owner, and John Rogers of Ariel Capital Management cuts a long-held defense company that delivered high gains over five years.

    Here are company updates and reviews of the billionaires' trades:  


  • John Rogers Takes 10% Stake in Two Companies

    Earlier today GuruFocus Real Time Picks reported Guru John Rogers’ two increases made on Sept. 30. The guru made a rather large increase to his stake in Rosetta Stone (RST) and a smaller yet notable increase to his position in Astro-Med (ALOT).

    Rosetta Stone (RST)
      


  • GuruFocus 5-year lows: Anworth Mortgage Asset Corporation, Contango Oil & Gas Company, Dendreon Corp, Sequenom Inc.

    According to GuruFocus list of 5-year lows, these Guru stocks have reached their 5-year lows: Anworth Mortgage Asset Corporation, Contango Oil & Gas Company, Dendreon Corp, Sequenom Inc.

    Anworth Mortgage Asset Corporation (NYSE:ANH) Reached the 5-year Low of $4.86  


  • Fierce Competition – Credit Card Processors Held by Numerous Gurus

    In a world of pay-by-plastic, e-commerce and mobile shopping, competition for electronic payment processing is fierce. Here’s a look at two very different credit card processors that provide electronic commerce and payment solutions. Both Total Systems Services Inc. and First Data’s owner KKR & Co. LP are up over 12 months and have a market cap of around $5 billion, but Total Systems Services may pull ahead in the next few years by aggressively entering the pre-paid card market of general purpose reloadable cards and payment cards, a global market that is expected to double in a few years.

    Total Systems Services Inc. (NYSE:TSS)  


  • Kids Decide on Dolls or Devices - JAKK, Others 70% Off

    Move over Cabbage Patch Kids® and Hello Kitty®. Kids are changing.

    Children have a strong preference for electronic devices, according to Stephen Berman, CEO and president of toy maker and action figure licensee, Jakks Pacific Inc. (NASDAQ:JAKK). Berman believes that the play behaviors of children have changed so much that new play behavior is at least one contributing factor in his toy company’s declining revenue. Berman commented in a company press release, “We also believe the decline in sales reflects the continuing change in play patterns of children of all ages, who continue to rely more and more on smart devices for their fun and entertainment. As previously announced, this shift in play patterns has caused companies like Jakks to evolve to meet the changing demands of its consumers with technologically enhanced product offerings.”  


  • John Rogers Comments on August

    At Ariel, we use skill in the ongoing quest to overcome luck in order to drive outstanding performance. Obviously, this effort generally goes toward picking stocks that beat the highly efficient market. But, as you know, our CEO and founder John W. Rogers, Jr. first learned about using skill to overcome luck in basketball. This month we want to explain how we overcame a tremendous and persistent investment challenge—heightened volatility during and after the financial crisis—by starting with our favorite sport: basketball.

    In his first six NBA seasons, Larry Bird won two NBA championships (in 1981 and 1984) as well as two MVP trophies (in 1984 and 1985). In his sixth season, he scored 28.7 points per game and hit 52% of his shots. He was on top of the basketball world. But in the first 25 games of his seventh season, he became mired in a bad shooting slump; his scoring fell five points per game and his shooting percentage dropped to 45%. Opinions on how to fix the problem ranged from the superficial and obvious, such as getting closer to the basket, to the extreme, such as hiring a shooting coach. In an interview during the slump, Bird had another take: The only thing I can do is work harder, try to give that extra effort and get over the hump . . . I have to go out and shoot that extra hour. I got to go out and run the extra hour. I have to go out and work on my foot movement.  


  • Five-Year Lows: Brookfield Property Partners LP, Fusion-io Inc., Boise Cascade Co., Jakks Pacific Inc.

    According to GuruFocus list of 5-year lows, these Guru stocks have reached their five-year lows: Brookfield Property Partners LP, Fusion-io Inc., Boise Cascade Co., Jakks Pacific Inc.

    Brookfield Property Partners LP (NYSE:BPY) Reached the Five-Year Low of $19.25  


  • July Commentary from Ariel's John Rogers

    Over the last couple of years, U.S. merger and acquisition activity has been a conundrum. On the one hand, equity valuations ranged from dirt cheap to reasonable all while corporations have held record amounts of cash. And yet, mergers and acquisitions have been slow. We have touched on this disconnect from time to time, but recently began to delve into the issue more deliberately as a result of a new development. Specifically, the market's traditional skepticism toward acquisitions has morphed into optimism this year.

    When an acquisition is announced, history has shown the acquirer's stock tends to fall, while the target's stock tends to rise. Obviously this is not true of every example, but the general reaction has been so common for so long that it is taken for granted as normal. It also makes some sense in most environments. The market knows that deals do not often work out as anticipated. Moreover, even mergers that seem sound create risk for the acquirer. Thus, investors often sell when a company announces an acquisition in order to avoid integration risk. Recently, some very provocative counter-examples to this well-established behavior began appearing. The one most benefitting our portfolios occurred when Gannett Co., Inc. (NYSE:GCI) agreed to acquire Belo Corporation (BLC) on June 13th of this year. Not only did Belo shares jump +28.3% that day, but Gannett leapt +34.0%. The deal's size and gains were outliers, but the event was a magnification of a trend rather than a reversal: throughout 2013, there were news stories about acquirers' shares rising rather than falling when deals were announced.  


  • Optimistic John Rogers of Ariel Investments Gives Top Stock Ideas

    John Rogers mentions Lazard (NYSE:LAZ), Janus Capital (NYSE:JNS) and KKR (NYSE:KKR).

      


  • John Rogers Comments on MTS Systems Corp.

    During the quarter, we initiated one position and exited two positions in Ariel Fund. We added MTS Systems Corp. (MTSC), which specializes in physical testing equipment. It occupies a key, important niche for manufacturing firms that are doing more and more virtual testing. In our view, companies are unlikely to abandon real-world physical tests; that stance is a contrarian one in a world where many believe virtual testing will eventually completely take over. In addition to significant potential growth, it boasts good operating margins, a sturdy balance sheet, and remains a very trusted brand.

    From John RogersAriel Fund Second Quarter 2013 Commentary.  


  • John Rogers Comments on Contango Oil & Gas Co.

    Natural gas producer Contango Oil & Gas Co. (MCF) slipped -15.81%, largely due to an acquisition. The company was also negatively affected by both the write down of a key reserve and a one-off maintenance on an important well. Clearly, however, the most important event was the acquisition of Crimson Exploration (CXPO). The market responded as if it were a surprise, but we did not think it one. That is, Contango had always operated with no debt, and eventually it would follow one of two paths: sell itself to a larger producer or use its balance sheet to acquire a distressed, leveraged competitor. In doing the latter, Contango emerges with more assets, more cash flows and yet has low leverage. We continue to admire the company and believe it to be quite cheap.  


  • John Rogers Comments on Hospira Inc.

    Injectible drug specialist Hospira, Inc. (HSP) shot up +16.69% on good and surprising news about a new compound. Specifically, its Inflectra drug—a biosimilar medicine to Remicade— was recommended for approval by a crucial European authority for multiple treatments. In Europe, it is likely to be approved to treat rheumatoid arthritis, inflammatory bowel disease and plaque psoriasis. Typically, a drug is only approved for one condition first and then may receive other indications over time. Given Remicade had sales of roughly $2 billion in Europe last year, this was huge news. In recent quarters, there has been such a tight focus on existing facilities and historical problems that few have looked to the future. Our point of view has been the issues will get fixed and the company will go on to create new and better compounds to continue to drive growth; it seems the market needed a reminder such a future was even possible.

    From John RogersAriel Fund Second Quarter 2013 Commentary.  


  • John Rogers Comments on Meredith Corp.

    Magazine publisher Meredith Corp. (MDP) soared +25.91% due to an earnings beat. Specifically, the company reported adjusted EPS of $0.72 versus consensus of $0.68. Revenues climbed 7% to $370 million, topping estimates of $355 million. A primary driver of results was advertising revenues—both national and local advertising increased substantially. In addition, the company brought down net debt from $340 million at the beginning of the year to $331 million as of the earnings announcement on April 25th. We believe the company has traversed a tricky landscape well over the last few years, sticking to its core competencies and smartly improving its already solid balance sheet.

    From John RogersAriel Appreciation Fund Second Quarter 2013 Commentary.  


  • John Rogers Comments on First American Financial Corp.

    Mortgage insurer First American Financial Corp. (FAF) slid -13.35% despite a good overall quarter. We believe the market was essentially confused. The company's official earnings per share were $0.33 versus the $0.42 consensus. The key reason for the miss, however, was a large reserve charge dating to the 2006-2007 period. Without the charge, earnings would have been roughly $0.44 per share. Revenues exceeded expectations by increasing +19%, and purchase orders were up +13%. Admittedly, those were trade-offs for refinancings, which were down -7%. Management was upbeat and optimistic about business, a perspective we think was fully justified. The stock now trades below 1x book, which we think is very cheap given its profitability, powerful market position and business trajectory.

    From John RogersAriel Appreciation Fund Second Quarter 2013 Commentary.  


  • John Rogers Comments on Towers Watson

    Consultant Towers Watson (TW) surged +18.21% as investors became increasingly aware of the potential for gains driven by the Affordable Care Act's implementation. Specifically, Towers Watson is largely known as a defined benefit plan pension consultant; it also, however, consults on related issues and has a health care consultancy. Moreover, in 2012 it purchased Extend Health, which was at the time the largest private Medicare exchange in the US. As businesses deal with the uncertainties stemming from this significant change, they naturally are seeking expertise—and Towers Watson is a go-to specialist in the field. Although we certainly do believe there is value in this part of the company's business, we have recognized it for some time, while the market seems to be treating it as new information.

    From John RogersAriel Appreciation Fund Second Quarter 2013 Commentary.  


  • John Rogers Comments on Interpublic Group of Cos. Inc.

    Advertising holding company Interpublic Group of Cos., Inc. (IPG) gained +12.27% after reporting a solid earnings quarter. The company's reported loss of -$0.13 per share was in line with analyst estimates, and contained significant good news below the headline. Specifically, organic revenue rose +2.3% globally and much better in Latin America and other key growth geographies. Crucially, the company retired its entire $200 million in 4.75% convertible senior notes, thereby bolstering the firm's capital structure. In addition, IPG repurchased 6.2 million shares of stock over the course of the quarter and increased the dividend by 25 percent. In other words, we were pleased with the way management made the key decisions under its control.

    From John RogersAriel Appreciation Fund Second Quarter 2013 Commentary.  


  • John Rogers' Ariel Appreciation Fund Second Quarter 2013 Commentary

    Investing in mid-cap stocks is more risky and more volatile than investing in large cap stocks. Ariel Appreciation Fund often invests a significant portion of its assets in companies within the financial services and consumer discretionary sectors and its performance may suffer if these sectors underperform the overall stock market. Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes the reinvestment of dividends and capital gains and represents returns of the Investor Class shares. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the period ended June 30, 2013, the average annual total returns of Ariel Appreciation Fund (Investor Class) for the one-, five and ten-year periods were +32.57%, +11.84% and +8.53%, respectively. The Fund's Investor Class shares had an annual expense ratio of 1.17% for the year ended September 30, 2012. Performance data current to the most recent month-end for Ariel Appreciation Fund may be obtained by visiting our web site, arielinvestments.com.

    Wow, that happened fast. Or so we think many investors would say. For a typical U.S. investor holding a portfolio diversified across domestic stocks, foreign stocks and bonds, the year started quite well. Through the first four months, there were down months here and there in an asset class or two, but most holdings showed gains— handsome ones in stocks. Cracks showed in May in foreign stocks and bonds, and then most everything fell in June. U.S. bonds lost more than -1% (for the second straight month), emerging market stocks lost more than -6% and domestic large-caps lost more than -1%. Those losses seem minor by comparison to gold, which as reported in The Wall Street Journal, "fell -23% in the second quarter, the biggest quarterly decline since trading of U.S. gold futures began in 1974." Conventional wisdom holds that it was Ben Bernanke's mid-June comments about quantitative easing that spurred the rout. To our minds, he simply signaled that quantitative easing would slow down at some point, which we would have thought an obvious truth. Many reacted, however, as if it was new and harsh news. We were pleased that the effects were less dramatic on our investment universes than they were on the recently popular areas such as bonds, emerging markets stocks and gold. So it is with pleasure that we note our positive returns during a difficult quarter. In the second quarter of 2013, Ariel Appreciation Fund returned +4.35%, outpacing the Russell Midcap Value Index and the Russell Midcap Index, which rose +1.65% and +2.21%, respectively.  


  • John Rogers Ariel Fund Second Quarterly Commentary

    Investing in small and mid-cap stocks is more risky and more volatile than investing in large cap stocks. Ariel Fund often invests a significant portion of its assets in companies within the financial services and consumer discretionary sectors and its performance may suffer if these sectors underperform the overall stock market. Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes the reinvestment of dividends and capital gains and represents returns of the Investor Class shares. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the period ended June 30, 2013, the average annual total returns of Ariel Fund (Investor Class) for the one-, five- and ten-year periods were +30.68%, +10.65% and +7.48%, respectively. Ariel Fund's Investor Class shares had an annual expense ratio of 1.06% for the year ended September 30, 2012. Performance data current to the most recent month-end for Ariel Fund may be obtained by visiting our web site, arielinvestments.com.

    Wow, that happened fast. Or so we think many investors would say. For a typical U.S. investor holding a portfolio diversified across domestic stocks, foreign stocks and bonds, the year started quite well. Through the first four months, there were down months here and there in an asset class or two, but most holdings showed gains— handsome ones in stocks. Cracks showed in May in foreign stocks and bonds, and then most everything fell in June. U.S. bonds lost more than -1% (for the second straight month), emerging market stocks lost more than -6% and domestic large-caps lost more than -1%. Those losses seem minor by comparison to gold, which as reported in The Wall Street Journal, "fell -23% in the second quarter, the biggest quarterly decline since trading of U.S. gold futures began in 1974." Conventional wisdom holds that it was Ben Bernanke's mid-June comments about quantitative easing that spurred the rout. To our minds, he simply signaled that quantitative easing would slow down at some point, which we would have thought an obvious truth. Many reacted, however, as if it was new and harsh news. We were pleased that the effects were less dramatic on our investment universes than they were on the recently popular areas such as bonds, emerging markets stocks and gold. So it is with pleasure that we note our positive returns during a difficult quarter. In the second quarter of 2013, Ariel Fund returned +1.69%, a gain between the Russell 2500 Value Index and the Russell 2000 Value Index, which rose +1.54% and +2.47%, respectively.  


  • Guru Weekly Real Time Update

    The following information is a highlight of the real-time guru activity we saw this week. To view more information on these gurus, check out their guru portfolios.

    Mario Gabelli  


  • John Rogers' Ariel Investments June Commentary

    The $85 billion question these days is: was the market sell-off in response to Ben Bernanke's recent public statements reasonable? We think there is no simple, straightforward answer to such a question but are happy to provide our views on the situation.  


  • John Rogers Makes 5 Real-Time Increases

    John Rogers made five real time increases on June 30. These increases came at the close of the second quarter.

    POZEN Inc. (POZN)
      


  • John Rogers (Ariel Investments) and John Calamos (Calamos Investments) 'Read the Tea Leaves'

    The Milken Institute has just released a roundtable conversation of investors from its 2013 conference. Participating in the roundtable are John Rogers and John Calamos Sr. (as well as others).

    The panel address the following and other questions:  


  • Ariel Investments' John Rogers - 'I Think We'll Move Higher from Here'

    John Rogers comments on QE taper, media stocks Meredith (NYSE:MDP), Gannett (NYSE:GCI), Northern Trust (NASDAQ:NTRS), KKR (NYSE:KKR), Lazard (NYSE:LGI), International Speedway (NASDAQ:ISCA) and Time Warner (NYSE:TWC).

      


  • John Rogers' May Commentary - What's Attractive and New Buys

    As we look back upon our own monthly commentaries thus far in 2013, we find a recurring theme: What appears attractive to us and to the broad investment community right now? In January, we wrote about the relative allures of stocks and bonds—and the possibility of a great rotation to equities. In February, we examined our top 10 firmwide holdings at the end of 2012 versus the end of 2011 in order to showcase what the difference suggested. After addressing how we calculate capacity in March, our April commentary discussed what the last few years' worth of fund flows and category returns say about investors' tastes for risk and reward. This month, we address another angle on this broad topic: how attractive are U.S. stocks at this point in time?

    We are answering the question because in one way or another it seems to be coming up consistently, or even constantly. In headlines, meetings with clients and prospects, and among professional investors it is a fairly hot topic, and as such a controversial one. A couple of years ago, it was conventional wisdom that stocks were a bad, risky bargain given the woeful global economy versus historically more stable bonds. (So much for conventional wisdom, by the way.) Now, however, there seems to be a more balanced debate. Investors have widely recognized that: the stock market is up more than 150% since March 9, 2009; the economy seems to be slowly but surely improving; relative to bonds going forward, stocks may well be a less risky proposition. On the other hand, naysayers continue to fret about the relatively long market climb since 2009, the overall valuation of stocks relative to certain periods in history, as well as a choppy global economy.  


  • John Rogers Ponders Buffett Quote in April Commentary

    Last year's April commentary provided an update from our annual pilgrimage to the Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) shareholder meeting. While the meeting's timing prevents us from doing so this year, we do want to ponder a key insight from legendary investor Warren Buffett. In his 1996 Berkshire Hathaway letter he wrote: "Charlie and I would much rather earn a lumpy 15% over time than a smooth 12%." We have been mulling over this statement because after years of outflows from U.S. equity funds and inflows to bond funds, investors seem to have changed behavior. Specifically, in 2013 they are once again sending new money to domestic stock funds. So we have been wondering what investors really want. As a start, we think it is clear the crowd is not with Warren and ourselves in preferring bigger, uneven gains to lower, placid ones.

    In recent years, investors have yanked assets away from surging equities and pushed them toward fixed-income securities that, in our view, were becoming increasingly unattractive. When examining the most recent data from Morningstar, we noticed that there were two categories of funds among investors' top five favorites over the past three-, five- and 10-year periods and two corresponding disliked groups. That is, the Intermediate-Term Bond and Diversified Emerging Markets (Equities) categories have ranked in the top five funds by inflows over all three periods while the Large Growth and Mid-Cap Growth cohorts have among the top-five outflows. For most investors, mid growth funds and emerging markets funds serve as supporting players whose flows might occur for a range of good reasons and be incidental to the portfolio overall. For that reason, we will focus on large growth and intermediate bond funds.  


  • John Rogers Comments on Western Union Co.

    In the first quarter, we initiated a position in Western Union Co. (WU), a current holding in Ariel Appreciation Fund and Ariel Focus Fund. Western Union is the global leader in money transfer and payment services. With over 500,000 locations that serve 200 countries, the company's scale and network advantages create high barriers to entry and attractive economics. Even though money transfer volumes are recovering from the global recession, the stock trades at a historically low valuation. We view Western Union as an excellent, wide-moat franchise, with meaningful growth prospects, excellent free cash flow generation and sustainable competitive advantages that position it well for an evolutionary shift towards mobile payments.

    From John Rogers’ first quarter 2013 commentary.  


  • John Rogers Comments on Chesapeake Energy Corp.

    Specifically, Chesapeake Energy Corp. (CHK), a holding in some of our other portfolios, priced a joint venture at prices roughly 35% lower than recent transaction values for similar land. The deal implied low prices for deals across the space, hitting Contango's stock. Many believe the company's sale is imminent, and while it is reasonable to assume it could be, we do not believe management would sell its unencumbered assets on the cheap when they can afford to wait. As patient investors, that is what we would do, and we count their team as fellow travelers.

    From John Rogers’ first quarter 2013 commentary.  


  • John Rogers Comments on Contango Oil & Gas Co.

    Also, natural gas exploration company Contango Oil & Gas Co. (MCF) fell -5.36% as the appetite for mergers and acquisitions in the industry lessened.

    From John Rogers’ first quarter 2013 commentary.  


  • John Rogers Comments on Simpson Manufacturing Co.

    Construction materials specialist Simpson Manufacturing Co., Inc. (SSD) returned -6.65% as short-term issues obscured the company's normalized earnings power. First, the company made four strategic acquisitions for a cost of roughly $115 million in 2010 and 2011. It did not take on debt in order to fund the takeovers and had more than $150 million in cash on the balance sheet afterwards. These purchases have crimped margins recently, largely due to lower research and development costs. Second, big box retailer Lowe's replaced one of Simpson's products with a lowercost competitor because negotiations over price broke down. We took this as a good signal: Simpson would not slash prices when housing construction remained slow. The housing market is recovering fast, and housing construction is advancing in sync, which we believe will boost Simpson's earnings back toward normalized levels.

    From John Rogers’ first quarter 2013 commentary.  


  • John Rogers Comments on Scientific Games Corp.

    On January 31, 2013, it was announced Scientific Games Corp. (SGMS) would purchase the company for $26.00 per share in an all-cash bid. We believe this result confirms our process. That is, we estimate an intrinsic value for our holdings, buying when shares trade at a significant discount to that calculation. Thus, even if a transaction occurs below our best estimate, there is still room to profit even when a lower bid is accepted. We sold the stock in response to the bid, in the $24 to $25 range.

    From John Rogers’ first quarter 2013 commentary.  


  • John Rogers Comments on WMS Industries Inc.

    In addition, leading gaming machine manufacturer WMS Industries Inc. (WMS), cashed in for a +41.09% gain as it agreed to a buyout. We purchased the stock in the last quarter of 2012 at around $16 per share; as part of our work, we calculated a strategic buyer would likely pay around $32 per share in an acquisition. At the time neither we nor anyone we know of anticipated an offer in the near-term; the calculation is a part of our discipline.

    From John Rogers’ first quarter 2013 commentary.  


Add Notes, Comments

If you want to ask a question or report a bug, please create a support ticket.


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)