Like many value investors, long term successful fund manager John Rogers is underperforming lately. But he stays to his guns and remains patient. His current favorite: Sotheby, Citigroup, Bio-Rad Laboratories, Inc
John Rogers calls himself Patient Investor. Obviously, patient is badly needed at this time. Rogers concentrated his investment selection on small and medium-sized companies whose share prices are undervalued. He believes that patience, independent thinking, and a long-term outlook are essential to achieving good returns. 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.
With $16 billion under management, John Rogers does not have an email address. He said: “I don't even have a computer in my office. If I had e-mail, I'd never take the time to read research or absorb information.” (Makes sense, just see how much time everyone of us wastes everyday with internet and emails.)
It seems that things worked well for John Rogers, until last year, when his fund lost 14.66%. Still, in the past decade his fund has earned nearly 12.6 percent a year, beating the market by more than 1.3 percentage points annually. He typically holds a stock for four or five years, an eternity compared with the 14-month holding period of the average mutual fund.
According to the website of Ariel Funds, Rogers likes Sotheby, Citigroup, Bio-Rad Laboratories, Inc.
Founded in 1744, today Sotheby’s is one of the world’s largest and most prestigious auction houses. The company offers properties across 70 collectible categories including fine art, antiques, rare jewelry, coins, medieval manuscripts and exotic sports cars. Beyond auctions, Sotheby’s also is involved in the purchase and resale of art and collectibles; brokering private purchases; and other art-related financing activities.
About Sotheby’s competitive strength, Ariel wrote: The company boasts over 100 years of appraisal history as well as highly-regarded proprietary research techniques for authenticating the history, originality and identity of art properties. Additionally, Sotheby’s provides clients with an extensive line-up of services including financing, appraisals, importing/exporting and marketing—making it difficult for smaller boutiques to compete.
Rogers thinks that the private market value of Sotheby’s is around $51. If true, the current market prices provide a 50% discount.
As of Feb. 29, Ariel owns more than 7 million shares of BID. He has been adding to his holdings. BID is also owned by other gurus like George Soros, Ron Baron etc. Director JOHN M ANGELO bought 46,000 shares over the past weeks.
Citigroup (C ):
Deeply involved in the sub-prime mess, Citigroup has been heavily punished. It lost more than 60% of its market value over the past 6 months, trading at around 9-year lows. Is it a buy now? John Rogers thinks so.
Here is why: Citigroup is truly a global company, deriving 54% of its revenues outside the United States … Citigroup is truly a global company, deriving 54% of its revenues outside the United States … We believe critics are excessively pessimistic and are not giving credit to the underlying strength of Citigroup’s diversified business model, world class brand, opportunities in emerging markets or its $113 billion in equity.
Rogers estimated that Citigroup is worth $54, compared with the current market prices of $22.5. Citigroup was traded even lower during last week.
For a lot of value investors, Citigroup is a “Black Box,” and too hard to figure out, even for legendary investor Jean-Marie Eveillard. (Watch the video of his Bloomberg interview). As one of largest companies in the world, Citigroup is widely held by our Gurus. In his most recent column with Forbes, Ken Fisher wrote: “I like Citigroup (nyse: C - news - people ) (25, C )... I think this is a $40 stock by mid-2009.”
Bio-Rad Laboratories, Inc. (BIO):
Bio-Rad Laboratories, Inc. designs and manufactures products for two key segments of the health care industry: life science research and diagnostics. To a lot of value investors, biotech seems to be a place which is out of “circle of competence.” This is why John Rogers likes it: Bio-Rad has several strategic advantages, including its brand name and reputation for excellence within the industry. John Rogers thinks it is an “unnoticed gem,” as there are only two Wall Street analysts cover it.