Ariel Funds Top Buys: "We think like Halvorsen: CRL is a buy"
John is not only engaged in managing Ariel's small and mid-cap institutional portfolios but it also operates Ariel Fund (ARGFX) and Ariel Appreciation Fund (CAAPX). He also writes a column called "Patient Investor" for Forbes.
Rogers' strategy refers to investing in small and medium-sized companies with undervalued share prices. Rogers considers that the way to achieve it is by having patience, independent thinking and a long-term outlook.
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.
Andreas Halvorsen's Viking Capital bought CRL as Ariel Funds did. CRL is one of the most interesting picks in the health care sector.
Charles River Laboratories International Inc. (CRL):
CRL is a leading provider of drug discovery and development services.
CRL is performing great. Indeed it represents 50% of the market worldwide and the research models and services segment is the leading provider of animal models for laboratory testing.
These models are largely used by drug developers and they are considered the main standard for laboratory testing.
As regards the RMS segment, it involves numerous competitive advantages, including its accumulated expertise in biosecurity, breeding, and distribution, and its animal service offerings, which create switching costs for clients.
In terms of future expectations, Charles River’s PCS segment will result in double-digit growth, boosted by more outsourcing penetration and the tendency of large drug companies to operate with a select group of vendors.
The price of the shares is very attractive and the buyback program represents an attractive use of capital.
CRL appear normally valued when I compare the price (black line) and the earnings justified valuation price (orange line). FAST Graphs values each stock and let me know very easy if it is trading cheap or expensive according to its normalized value.
Hospira Inc. (HSP):
Hospira manufactures injectable generic pharmaceuticals and medication-management devices and systems. Each of them represents 70% and 30% of total company revenue. The firm's products include generic drugs, intravenous solutions, infusion pumps and medication safety and administration software.
In terms of sales, 20% thereof came from international operations. HSP also earns through manufacturing agreements with pharmaceutical companies that do not have high-volume injectable manufacturing capabilities.
Most importantly, HSP is one of the companies that has produced and marketed biosimilars, such as generic Epogen and Neupogen with success. In terms of future expectations, the company’s international expansion should drive additional growth during the next few years.
Littelfuse Inc. (LFUS):
Littelfuse designs, manufactures, and sells products that protect circuits against surges in voltage and current. The company is present in the electronics, the automotive and electrical markets, which represent 64.1%, 21.4% and 14.4% of sales respectively.
LFUS is very well positioned. Indeed the increase in the complexity and functionality of consumer and automotive electronics requires more circuit protection devices.
The company has a diversified customer base, selling to more than 4,000 customers worldwide. In addition, no customer accounts for more than 10% of sales.
Lazard Ltd. (LAZ):
Lazard's history in the market dates back to 1848. The company is involved in merger and acquisition advisory, restructuring advisory, and asset management. With offices in more than 40 cities across 25 countries, Lazard stands very well from a geographical perspective.
The company is well-recognized for its expertise in restructuring, and fortunately, it benefits from a poor economic environment.
The company’s assets under management are largely equity-based, and should experience growth along with the overall market. Also, its diversified revenue sources should enable the company to maintain profitability in the future.
Jones Lang LaSalle Inc. (JLL):
Jones Lang LaSalle was formed by the 1999 merger of London-based Jones Lang Wootton and Chicago-based LaSalle Partners. JLL has operations across the globe as it serves real estate owners, occupiers, and investors in 70 countries. Jones Lang's investment arm has about $48 billion in assets under management.
JLL has a particular feature. It is a one-stop-shop real estate service vendor. This characteristic has enabled JLL to win a large portion of the market as large organizations usually expect to enter into real estate contracts with only one provider.
The business is diversified in terms of geography. Revenue streams come from foreign locations. Lang's business is performing very well despite the volatility of the industry where it works.
Similar to CRL, Jones Lang stock appears normally valued according to the Fast Graphs valuation tool.