Rupal Bhansali, fund manager at Ariel Investments, appeared on Consuelo Mack’s Wealthtrack and generously shared her take on value investing and several interesting investment ideas. At Ariel Investments the focus is on intrinsic value investing, which means it does not base investment decisions on relative value but tries to buy companies at a discount to their intrinsic values. Bhansali is also a contrarian and likes ideas that are out of favor:
GlaxoSmithKline
One of the more contrarian holdings in her fund is GlaxoSmithKline (GSK, Financial), which has been out of favor since its blockbuster drug Advair went off patent. The market has sold the pharmaceutical giant off like there is no tomorrow, but in fact the inflection point is near, and it is likely to start growing earnings. It trades at just 15x earnings and pays a 6% dividend while holders wait for it to appreciate.
Baidu
The Chinese search engine Baidu (BIDU, Financial) has sold off sharply due to the Chinese slowdown. However, it is not just the Chinese Google (GOOG, Financial) but also the Chinese Open Table, Expedia (EXPE, Financial), Groupon (GRPN, Financial) and Ticketmaster. She does not like the China macro picture at all, but this is a one-stop shop long on Chinese Silicon Valley, which is likely to compund earnings at 20% per year for an indefinite period of time with the penetration of the Internet in China actually being in its early innings. There is some political risk but according to Bhansali that is priced in. Baidu is just cheap enough.
Gilead Sciences
She is very bullish on health care and likes the sector in general. One of her favorite stocks is Gilead (GILD, Financial) which actually went up 5x in price over the past few years, but it has grown earnings 6x. Consequently it still trades at only 10x earnings while it has come up with an actual cure for hepatitis C.
She made one remark that I thought was extremely interesting in that she recommended volatility over stability. In her mind going long volatility in the current market is actually less risky than going long stability or as she put it succinctly:
Stability is a crowded trade
