Page 33 - Kiplinger's Personal Finance - November 2018

AHEAD Commentary

OPENING SHOT James K. Glassman
Lunch With Ariel’s John Rogers

ohn Rogers is a double anomaly. Hooked at an early age. John’s father got larized value investing—that is, pur-
At a time when investors are in- him interested in the market by giving chasing stocks that are out of favor
Jcreasingly turning to index funds, him shares of stock as birthday pres- and have low valuation measures, such
he picks individual stocks. And at a ents. At Princeton, John majored in as price-earnings ratios, compared
time when the market prefers growth- economics. One of his professors was with the broader market. The other
oriented companies, he buys value- Burton Malkiel, author of the 1973 was John Train’s The Money Masters,
priced shares. A former basketball star classic A Random Walk Down Wall which profiled great investors, includ-
at Princeton, he launched Chicago- Street. Malkiel is still active today ing Benjamin Graham, the founding
based Ariel Investments in 1983, at age and a fierce advocate of the efficient father of bargain hunting.
25. The firm’s flagship public fund, market hypothesis—the idea that Part of the appeal of value investing
ARIEL FUND (SYMBOL ARGFX), opened three stocks reflect all available information for Rogers is that it’s intellectually
years later. He’s still lead manager of about them, so they are correctly, or challenging. “It’s fun to be different,”
Ariel, which has returned an annual- efficiently, priced. The logical conclu- he says. “Betting against the crowd is
ized 11.6% over the past decade, beat- sion for investors, then, is to buy index awfully satisfying when it pays off.”
ing the Russell 2500 Value index by an funds with low expenses. For many young investment profes-
average of 1.7 percentage points a year. Rogers, however, became convinced sionals when Rogers was beginning
(Returns and other data are as of Sep- that some stocks—especially smaller his career, value managers became he-
tember 14.) companies that are less followed and roes: John Neff, of Vanguard Windsor
I interviewed Rogers over lunch in less understood—can offer significant Fund; Ralph Wanger, of Columbia
Washington, D.C., at the Hay-Adams opportunities. He was especially in- Acorn; the late Sir John Templeton,
Hotel, across from the White House. fluenced by two books, now classics, of Templeton Growth Fund; and War-
Rogers was co-chair of President that were published in 1980, the year ren Buffett, of Berkshire Hathaway,
Obama’s inaugural committee, and he graduated from college. One was who was Graham’s disciple. Rogers
the Rogers family is steeped in politics David Dreman’s Contrarian Invest- decided early on, “We’re going to be
and public service. His mother was the ment Strategy, true-blue Buffett value investors.”
first African-American woman to which popu- But Rogers channels Buffett with a
graduate from twist. Berkshire has become so large
the University ($534 billion in market value) that
of Chicago ROGERS BECAME Buffett has to invest in giant busi-
law school. nesses, such as American Express and
A Republican, CONVINCED IN THE Coca-Cola. Rogers, on the other hand,
she gave a 1980s THAT SMALLER largely focuses Ariel ($2.3 billion in
seconding COMPANIES THAT WERE assets) on midsize companies, where
speech for market inefficiency is at play.
Richard LESS UNDERSTOOD Still, like Buffett, Rogers invests
Nixon at the OFFERED SIGNIFICANT within his firm’s own “circle of
nominating OPPORTUNITIES. competence,” which includes
convention in consumer products, finance,
1960 and later media and industrials. Outside
became a dep- the circle are the tech stocks
uty solicitor general and an ambassa- that in recent years have
dor. Rogers’s father, a Democrat, was spelled success for other
one of the original Tuskegee Airmen funds. According to its latest
(the pioneer African-American avia- report, Ariel’s 39-stock port- POON WATCHARA-AMPHAIWAN
tion squadron during World War II) folio eschews market darlings
and served as a juvenile court judge such as Netflix, Amazon.com or any
in Cook County for 21 years. other hot internet stock.

18 KIPLINGER’S PERSONAL FINANCE 11/2018

K11-GLASSMAN.a.indd 18 9/19/18 6:49 PM