Page 34 - Kiplinger's Personal Finance - November 2018

AHEAD

Like Buffett, Rogers holds his stocks
for a long time. Ariel first purchased “IT’S FUN TO BE DIFFERENT,” ROGERS SAYS. “BETTING AGAINST
J.M. Smucker Co. (SJM)—whose THE CROWD IS AWFULLY SATISFYING WHEN IT PAYS OFF.”
brands include not just the eponymous
jam but also Carnation, Crisco, Folgers
and Jif—back in September 2002.
Since then, the stock, now Ariel’s 10th- this year, and he is holding on to Via- (including so far in 2018). As a result,
largest holding, has roughly quintu- com (VIA), owner of Paramount and many funds whose past style was
pled in price. Smucker remains a solid, MTV, whose shares are trading about value have shifted toward growth.
relatively unloved stock, with a P/E where they were a decade ago. But, in addition to Ariel, some value
of 13, based on analysts’ earnings esti- Ariel is well diversified, with its stalwarts remain. VANGUARD WINDSOR
mates for the fiscal year ending April largest holding, KKR & Co. (KKR), (VWNDX), the fund Neff ran for 31 years,
30, 2019. The company has hiked its representing only 5.0% of assets. has returned an annual average of
dividend from an annual payout of Shares of KKR, a private-equity firm, 10.3% over the past 10 years and car-
72 cents in 2002 to $3.26 this year. have been rising this year after KKR ries an expense ratio of just 0.31%,
The current yield is a generous 3.1%. converted from a partnership to a cor- compared with Ariel’s 1.01%. Top hold-
I asked Rogers whether there were poration, mainly for tax reasons. The ings in its broadly diversified portfolio
many opportunities like Smucker. “ Oh, stock trades at a P/E of 15, based on are Bank of America (BAC) and insurer
there’s no shortage of value stocks,” he 2019 earnings estimates. American International Group (AIG).
said. He particularly likes media and Another good choice is FIDELITY MID CAP
information firms. Rogers remains Scouting new stocks. Rogers and his VALUE (FSMVX), with an average annual
faithful to such companies as Nielsen fellow analysts at Ariel look for new 10-year return of 10.1% and an expense
Holdings (NLSN), the marketing and ideas the way most of us do: by read- ratio of 0.69%. Fidelity brought in a
media firm, despite a dismal showing ing and talking to people they trust. new manager, Kevin Walenta, last year,
When an idea surfaces and he has made big changes in the
that seems to have merit, portfolio. Among his largest recent
■ EVEN AFTER A
LONG BULL MARKET, Rogers says, he assigns investments are Huntsman (HUN),
JOHN ROGERS SEES someone to do a prelimi- a chemical company, and Lear (LEA),
“NO SHORTAGE” OF nary report—and someone an automotive seating manufacturer.
VALUE STOCKS.
else to be “devil’s advocate,” Each carries a P/E of just 8.
warning of the pitfalls of Rogers says he has a feeling “the
the purchase. The next step tide might be turning” in favor of
is to visit the site, a trek a new value cycle. But cycles are not
often made by senior mem- really the point. Nor is the economy.
bers of the team, including Rogers is optimistic about economic
Rogers himself. growth, but he doesn’t buy stocks
The analysts rank their based on it. He hunts bargains, period.
holdings according to a pro- Over the long term, value is where the
prietary formula based on performance is. Market return data
cash flow. When the differ- from Ibbotson Associates, a unit of
ence between what the Morningstar, show that since 1926, a
team thinks a stock is worth value orientation has beaten a focus
and what it costs becomes on growth across companies of all
too narrow, it’s time to sell. sizes. The reason, almost certainly,
The forward P/E and price- is that value stocks are irrationally
to-book-value ratio of the rejected by investors. Or, as Rogers
average Ariel stock is one- puts it, “There are still inefficiencies
fourth lower than those in markets. I thought that 35 years
of the average stock in the ago, and I still believe it.” ■ VICTOR POWELL/COURTESY ARIEL INVESTMENTS
S&P 500.
Growth and value tend to JAMES K. GLASSMAN CHAIRS GLASSMAN ADVISORY, A PUBLIC-
AFFAIRS CONSULTING FIRM. HE DOES NOT WRITE ABOUT HIS
be cyclical investing styles. CLIENTS AND, OF THE STOCKS AND FUNDS MENTIONED IN THIS
COLUMN, HE OWNS ONLY AMAZON.COM. HIS MOST RECENT
Growth has beaten value BOOK IS SAFETY NET: THE STRATEGY FOR DE-RISKING YOUR
in eight of the past 10 years INVESTMENTS IN A TIME OF TURBULENCE. CONTACT HIM AT
JGLASSMAN@KIPLINGER.COM.
20 KIPLINGER’S PERSONAL FINANCE 11/2018

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