John Rogers (Trades, Portfolio) of Ariel Investments appeared on CNBC Monday to discuss his view of the markets.Â
Rogers said he thinks the market has sold off too much. People are worried rates will go up faster than they anticipated and that a recession may be coming. The sell-off has hit all sectors, he said. Some names are off 30-40%.
He offered three buy suggestions after the sell-off:
1. Mohawk Industries (MHK, Financial)
Mohawk is a major manufacturer of carpets that has been wonderfully consistent. It has been one of Ariel's "steady Eddies" for over a decade. Rogers said that he believes it is a quality names that is being thrown out with the trash. He expects numbers to come out stronger than people think in 2019. Mohawk's enterprise value is about $11 billion.
Insider ownership is good, and nearly $2 billion in adjusted Ebitda seems attractive enough against the $11 billion enterprise value. The "adjusted" is a bit tricky though.
Rogers also likes the financials, particularly good quality,fee-generating businesses.
2. Jones Lang La Sange (JLL, Financial)
Jones Lang La Sange is a global real estate management company. It offers fee-based advice and services in this business but also manages assets. It generates about $175 million in Ebitda per quarter without its assets management business. The asset management business entails about $60 billion in assets under management. Without even considering the asset management firm, Jones Lang La Sange trades at less than 10x EV/Ebitda.
Ken Jacobs is an outstanding CEO, Rogers said. It is extremely frustrated by how low its share price is, and its asset management business is very well-positioned. The investment banking side is also adept at restructuring. Restructuring is currently not a big business because there are very few bankruptcies. If the cycle turns, that could change.
I researched this extensively after learning about it from Rogers. In a recent article for GuruFocus, I highlighted how attractive the business is in more detail. To quote a key piece:
"Lazard may go through some temporary turbulence with markets experiencing a drawback. Emerging markets got hit hard and this may decrease assets under management through bad results and outflows. However, the sheer undeniable value present in this company is hard to ignore. Both the fact that it trades at between 5x to 6x free cash flow and that its investment banking side appears to get completely ignored leads me to believe this is one of the best values among asset and wealth managers."
Disclosure: Author is long Lazard.
Read more here:Â
John Rogers' 3rd Quarter Ariel Fund Investor Commentary
John Rogers of Ariel Investments Doesn't Fear the Next Crisis
