John Rogers Comments on Nielsen Holdings Plc

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Jul 24, 2017

Nielsen Holdings Plc (NYSE:NLSN), the global provider of critical data and analytics about what consumers watch and buy, was the lone addition to Ariel Fund during the quarter. The company’s television ratings are the de facto currency for media and advertising decisions totaling hundreds of billions of dollars globally. Its consumer purchase data is unmatched in scope and scale, and therefore mission-critical information for the world’s leading consumer packaged goods players. As both television viewership and purchasing behavior become more fragmented across online and mobile devices, investors are concerned that Nielsen’s dominance is at risk. But, in our view, this fragmentation only makes Nielsen’s data more valuable. As such, we see the current fears as an opportunity to own a market share leading information services brand with highly recurring and growing free cash flows. We did not eliminate any positions during the quarter.

As we look ahead, we remain cautiously optimistic about the economy. During our recent earnings calls, we noticed a shift from cost- cutting to top-line earnings growth, as well as increased optimism from company CEOs on the future of the economy, particularly within small companies. That said, we believe current valuations are difficult to overlook. As of June month-end, the S&P 500 Index traded at 18.5X forward earnings and the Russell 2000 Index traded at 19.3X forward earnings. While these figures are definitely above average, we do not yet consider them to be in dangerous territory. We remain disciplined with our approach and are confident in our portfolio positioning, which is at a deep discount relative to the indexes. Historical patterns have suggested this is a positive leading indicator for strong performance going forward.