PBH - Ariel Investments Small Cap Value Concentrated Q2 2024 Commentary

2024-08-01 14:52:00 ET

Summary

• The bull market powered through the second quarter fueled by investor enthusiasm for artificial intelligence (AI) themed stocks.
• The Ariel Small Cap Value Concentrated Composite fell -4.10% gross of fees (-4.34% net of fees) in the quarter, lagging both the Russell 2000 Value Index and the Russell 2000 Index, which returned -3.64% and -3.28%, respectively.
• We initiated two new positions in Affiliated Managers Group and Prestige Consumer Healthcare.
• We exited our positions in BOK Financial Corporation and Stericycle.

The bull market powered through the second quarter fueled by investor enthusiasm for artificial intelligence ((AI)) themed stocks. This narrow, momentum-driven, rally helped the S&P 500 eke out a modest gain, even as Mid and Small-Cap companies declined. The resulting bifurcation has been extreme, as the non-AI companies in the S&P 500 Index lost 1.2%. ¹ This limited market breadth likely reflects weakening economic growth and inflation in the U.S. With many investors cautiously optimistic the Federal Reserve will successfully engineer a soft landing, interest rate cuts may be at hand in the coming months. Still, the turmoil surrounding the U.S. election is becoming a new focal point. Although uncertainty is high and volatility will likely remain elevated, we view these risks as short-term noise within the context of our long-term investment horizon. Against this backdrop, the Ariel Small Cap Value Concentrated Composite fell -4.10% gross of fees (-4.34% net of fees) in the quarter, lagging both the Russell 2000 Value Index and the Russell 2000 Index, which returned -3.64% and -3.28%, respectively....

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