Ariel Investments is a firm with a value investing philosophy, founded by John Rogers (Trades, Portfolio) and based in Chicago, Illinois, with offices in New York and Sydney. Since 1983, they have been disciplined, long-term investors with a turtle for a logo, which represents their patient, long-term approach.
On Sept. 11, Ariel Focused Value Fund manager Charles Bobrinskoy appeared on CNBC and talked about the great week for value investors as value trounced momentum and other styles. He tends to be rather bullish, which is great to challenge my personal views. He also talked to Bloomberg radio on Sept. 11, from which I gathered some additional context on his thinking.
Here are Bobrinskoy's key points:
In the last three days, Ariel outperformed the S&P 500 (SPY) by 300 basis points. They are delighted valuation finally seems to matter.
Bobrinskoy likes financials, such as:
Goldman Sachs (GS)
Goldman is trading at 0.98x book value and 9x earnings.
JPMorgan trades at 1.6x book value and 12x earnings. Bobrinksoy didn't say this, but it is generally considered to be one of the best-run banks under the leadership of Jamie Dimon.
Bank of America (BAC, Financial)
Bank of America is trading at 1.12x book value and 10.5x earnings. It is the largest bank holding in Warren Buffett's Berkshire Hathaway (BRK.A)(BRK.B) portfolio.
Citigroup is trading at 0.87 book value and just 9.5x earnings.
Morgan Stanley (MS, Financial)
Morgan Stanley is trading at 1x book value and 9.5x earnings.
Wells is trading at 1.22x book value and 10x earnings. It used to be perceived as a high-quality organization and traded at a premium to other banks. Due to the account opening scandal and turnover at the top, the bank has traded substantially lower.
Market observations
If we get a trade deal this market is going up a lot, Bobrinskoy said. The tech trade is dead. When the dot-com bubble burst, value stocks outperformed 30-40%. Value indexes are trading at 13x earnings, which is above the valuation of the banks, even. Value stocks are trading at very attractive prices, he said. It is the tech stocks that are pulling the average valuation of the S&P 500 (SPY) to highs.
Disclosure: No positions.
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