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Holly LaFon
Holly LaFon
Articles (8905)  | Author's Website |

John Rogers Ariel Investments October Commentary

Discussion of the month

November 13, 2017 | About:

Markets once again achieved historic highs in October, with the Dow Jones Industrial Average soaring above 23,000. As shown in the chart above, all of the major indices –around the world and across capitalization spectrums – delivered small gains for the month. Globally, economic indicators continue to be largely positive with growth expectations supporting the positive sentiment in the markets today. Across sectors, commodities were the most newsworthy during the month. Expectations of OPEC production cuts extending beyond March 2018 drove oil prices higher. Brent Crude Oil topped $60 per barrel for the first time in more than two years.

Earlier this year, legislative and regulatory uncertainty surrounding downward pressure on drug pricing and rising insurance costs in the United States caused investors to all but abandon the health care sector. As contrarian investors, this dislocation provided us with an opportunity to invest in companies that have attractive long -term prospects at deep discounts. Our research seeks to identify those companies which are, in our opinion, unjustly tainted by such fears.

Within our small-cap portfolios, for example, we have discovered compelling health care services companies which will benefit from the developed world’s aging population and are not dependent upon a binary outcome, such as the success or failure of a specific drug or medical device. Our international and global research process has similarly unearthed a handful of pharmaceutical companies that we believe to be misunderstood and therefore mispriced. Specifically, we have invested in a company that provides medications to people suffering from chronic conditions for which there are treatments but no cure. As these drugs increase life spans, we expect these products to generate an annuity-like income stream for the company. While valuations within the health care sector have risen along with the market, we believe there is further upside potential as the specific companies in which we invest become more fully-appreciated by investors over time.

The opinions expressed are current as of the date of this commentary but are subject to change. The details offered in this commentary do not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security.

About the author:

Holly LaFon
I'm a financial journalist with a master of science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


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