MGRD - Tracking John Rogers' Ariel Investments Portfolio - Q3 2022 Update

Summary

• Ariel Investments’ 13F portfolio value decreased from $10.02B to $9.11B this quarter.
• They increased Zebra Technologies, Equity Commonwealth, and Generac Holdings while reducing Adtalem Global Education, Snap-on, and J. M. Smucker.
• The top three positions are Baidu, Mattel, and Philip Morris, and they add up to ~10% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Ariel Investments’ 13F stock portfolio on a quarterly basis. It is based on Ariel Investments’ regulatory 13F Form filed on 11/14/2022. John Rogers’ 13F portfolio value decreased ~9% from $10.02B to $9.11B this quarter. The portfolio is diversified with recent 13F reports showing around 150 positions. There are 59 securities that are significantly large (more than ~0.5% of the portfolio each) and they are the focus of this article. The largest five stakes are Baidu, Mattel, Philip Morris, Madison Square Garden Entertainment, and BOK Financial. They add up to ~16% of the portfolio. Please visit our Tracking John Rogers’ Ariel Investments Portfolio series to get an idea of their investment philosophy and our last update for the fund’s moves during Q2 2022.

Their flagship mutual fund is the Ariel Fund ( ARGFX ) incepted in 1986. Ariel Fund has a lifetime annualized return of 10.25% compared to 10.09% for the Russell 2500 Index and 10.17% for the S&P 500 Index. In the most recent 10-year period, it has underperformed the S&P 500 index: 9.14 % vs 11.70%. The other mutual funds in the group are Ariel Appreciation Fund ( CAAPX ), Ariel Focus Fund ( ARFFX ), Ariel International Fund ( AINTX ), and Ariel Global Fund ( AGLOX ).

Note: Some of the top holdings in their International and Global funds are not in the 13F report as they are not 13F securities. They are Roche Holding AG ( RHHBY ), Deutsche Börse AG ( DBOEY ), Michelin ( MGDDY ), Endesa SA ( ELEZF ), Koninklijke Ahold Delhaize ( ADRNY ), and Snam SpA ( SNMRY ).

Stake Increases:

Madison Square Garden Entertainment ( MSGE ): MSGE is currently a large (top five) 13F stake at ~3% of the portfolio. It was built over the seven quarters through Q4 2021 at prices between ~$64 and ~$116. The stock currently trades well below that range at $42.72. Last two quarters have seen minor increases.

Note: Ariel Investments has a ~23% ownership stake in Madison Square Garden Entertainment.

Resideo Technologies ( REZI ): The 2.69% REZI stake was built during the last three quarters at prices between ~$19.50 and ~$28 and the stock currently trades below that range at $16.33. There was a marginal increase this quarter.

Gentex Corp ( GNTX ): The 2.41% GNTX stake was purchased in Q3 2021 at prices between ~$27.50 and ~$38 and the stock currently trades at $27.12. There was a ~12% stake increase last quarter and a marginal increase this quarter.

Interpublic Group ( IPG ): The 2.41% IPG stake is a very long-term position that goes back almost two decades. It was first purchased in 2001 and the position was built to over 41M shares by 2005 at prices between $9 and $42. Recent activity follows: 2018 saw a ~20% selling at prices between $20 and $25 while next year saw a ~40% stake increase at prices between $19.50 and $24. There was a ~25% selling over the three quarters through Q1 2022 at prices between ~$31 and ~$39.50. The stock currently trades at $33.60. Last two quarters have seen a ~15% increase.

Kennametal Inc. ( KMT ): KMT is a 2.40% of the portfolio position. It was established in 2014 at prices between $34 and $52. The position had seen minor buying over the years. Q1 2020 saw a ~15% stake increase at prices between $15 and $37. The three quarters through Q3 2021 had seen another ~43% stake increase at prices between ~$33 and ~$42. The stock currently trades at $24.54. Last four quarters have also seen further buying.

Note: Ariel Investments has a ~12% ownership stake in Kennametal Inc.

Jones Lang LaSalle ( JLL ): The 2.20% JLL position is a very long-term stake first purchased in 2001. Next year saw a huge stake build-up at prices between ~$14.50 and ~$25. The position has seen selling since 2004. The bulk of the selling happened in 2006 at prices between ~$55 and ~$93. Most years since have also seen selling. H2 2020 saw a ~25% stake increase at prices between ~$90 and ~$154. The stock currently trades at ~$158. Last three quarters have seen incremental buying.

Northern Trust ( NTRS ): NTRS is a 2.13% very long-term position first purchased in 2002. The 2002-2004 timeframe saw a ~10M share stake built at prices between ~$30 and ~$60. The position has since been sold down. The bulk of the selling was in the 2005-2007 timeframe at prices between ~$42 and ~$81. Last few quarters have seen incremental buying. The stock currently trades at $87.90.

Mohawk Industries ( MHK ) : MHK is a ~2% of the portfolio position built over the last three years at prices between ~$117 and ~$230 and it is now well below that range at $98.21. There were minor increases in the last two quarters.

Affiliated Managers Group ( AMG ), Boyd Gaming ( BYD ), Charles River Laboratories ( CRL ), Core Laboratories ( CLB ), Equity Commonwealth ( EQC ), Generac Holdings ( GNRC ), Janus Henderson Group ( JHG ), KKR & Company ( KKR ), Knowles Corp ( KN ), Madison Square Garden Sports ( MSGS ), Norwegian Cruise Line Holdings ( NCLH ), OneSpaWorld Holdings ( OSW ), Paramount Global ( PARA ) previously ViacomCBS, Royal Caribbean Cruises Ltd. ( RCL ), Simpson Manufacturing ( SSD ), Stanley Black & Decker ( SWK ), Stericycle Inc. ( SRCL ), Verizon Communications ( VZ ), and Zebra Technologies ( ZBRA ): These small (less than ~2% of the portfolio each) stakes were increased during the quarter.

Note: Ariel Investments has significant ownership stakes in Knowles Corp, Madison Square Garden Sports, and OneSpaWorld Holdings.

Stake Decreases:

Baidu Inc. ( BIDU ): BIDU is currently the largest 13F position at 3.36% of the portfolio. It was established in 2013 with the bulk of the current position purchased in 2015 at prices between ~$134 and ~$234. The interim years had seen minor buying and in 2018 there was a ~25% increase at prices between $157 and $273. Q1 to Q3 2019 saw another one-third increase at prices between ~$97 and ~$142. H1 2020 had seen a ~50% stake increase at prices between ~$84 and ~$145. Q1 2021 saw a ~18% selling at prices between ~$204 and ~$340 while in Q3 2021 there was a ~12% stake increase at prices between ~$137 and ~$202. The stock currently trades at ~$117. Q1 2022 also saw a ~9% increase. Last two quarters have seen only minor adjustments.

Mattel Inc. ( MAT ): The large (top three) 3.28% MAT position was first purchased in 2016 at prices between ~$25 and ~$34. Next year saw a stake doubling at prices between ~$13 and ~$30.50. 2018 also saw a one-third stake increase at prices between ~$9.50 and ~$18. Q1 2019 saw a ~12% trimming while the next two quarters saw a one-third increase at prices between ~$9.50 and ~$14.50. Q1 2020 saw another ~15% stake increase at prices between $7.25 and $14.75. H2 2021 had also seen a ~17% increase at prices between ~$18 and ~$23. Last two quarters saw a similar trimming. The stock currently trades at $17.02. There was a minor ~2% trimming this quarter.

Note: They have ~4.5% ownership stake in the business.

Philip Morris ( PM ): A very small position in PM was first purchased in 2013. By 2017, the stake was built to a ~1M share stake. Next year saw the position increased by ~220% at prices between $66 and $110. 2019 had seen another ~20% stake increase at prices between $70 and $91. The three quarters through Q3 2020 had also seen a ~20% stake increase. Q1 2021 saw another ~15% stake increase at prices between ~$79 and ~$91 while next quarter there was a ~20% selling at prices between ~$88 and ~$101. The stock currently trades at ~$103, and it is currently a top three stake at 3.26% of the portfolio. Last five quarters have seen only minor adjustments.

BOK Financial ( BOKF ) : The 2.96% BOKF stake was built during the 2019 to 2021 timeframe at prices between ~$37 and ~$116. The stock currently trades at ~$104. Last three quarters have seen only minor adjustments.

Lazard Ltd. ( LAZ ): LAZ is a 2.76% of the portfolio position first purchased in 2009 at prices between ~$19 and ~$38. Next year saw a stake-tripling at prices between ~$25 and ~$36. The interim period saw further buying but in 2014 there was a ~25% selling at prices between ~$39 and ~$50. Recent activity follows. 2019 saw a ~15% increase at prices between ~$31 and ~$40.50. The three quarters through Q3 2021 saw another ~45% stake increase at prices between $38.70 and $48.75. The stock is now at $35.25. There was a ~10% trimming this quarter.

Note: Ariel Investments have a ~6.3% ownership stake in Lazard.

Microsoft Corp ( MSFT ): MSFT is now at 2.58% of the 13F portfolio. It was a very small stake first purchased in 2010. The 2013-2015 timeframe saw a 2.2M share build-up at prices between ~$26 and ~$56. Recent activity follows: 2019 had seen a ~22% reduction at prices between ~$100 and $160. 2020 to 2021 time period saw another ~50% selling at prices between ~$137 and ~$343. The stock currently trades at ~$237. They are harvesting gains. Last three quarters have seen only minor adjustments.

First American Financial ( FAF ): FAF is a ~2% of the portfolio stake established in 2011 at prices between ~$11 and ~$17. 2013 also saw a ~25% stake increase at prices between ~$21 and ~$28. The position has seen consistent reductions since 2015. Recent activity follows: 2019 had seen a ~20% selling at prices between ~$45 and ~$64. There was a ~25% stake increase in Q4 2020 at prices between ~$44.50 and ~$54.50. That was followed with a similar increase in Q1 2021 at prices between ~$51 and ~$58. Next quarter saw a ~15% selling at prices between ~$64 and ~$81. The stock is now at $52.58. Last two quarters have seen only minor adjustments.

Envista Holdings ( NVST ): The 1.91% NVST stake was purchased in Q1 2020 at prices between ~$12 and ~$33. There was a ~75% stake increase next quarter at prices between ~$13 and ~$24.50. The stock currently trades at $32.96. Last few quarters have seen minor trimming.

Snap-on Inc. ( SNA ): SNA is a 1.61% of the portfolio stake purchased in 2012 at prices between ~$52 and ~$80. Next year saw a ~50% stake increase at prices between ~$80 and ~$110. There was a ~30% reduction this quarter at prices between ~$196 and ~$233. The stock currently trades at ~$230.

J. M. Smucker ( SJM ): SJM is a very long-term stake that has been in the portfolio for well over a decade. The original huge stake was sold down in 2008. Q1 2020 saw another ~30% selling at prices between ~$96 and ~$119. Q1 2021 saw a ~40% stake increase at prices between ~$111 and ~$131. Last three quarters saw a ~50% reduction at prices between ~$122 and ~$145. The stock currently trades at ~$160 and the stake is now at 1.11% of the portfolio.

ADT Inc. ( ADT ), Aflac Inc. ( AFL ), Amdocs Ltd. ( DOX ), Axalta Coating ( AXTA ), Adtalem Global Education ( ATGE ), Brink’s Co ( BCO ), BorgWarner Inc. ( BWA ), Bristol Myers Squibb ( BMY ), Check Point Software ( CHKP ), CBRE Group ( CBRE ), Credicorp Ltd. ( BAP ), Charles Schwab ( SCHW ), Gilead Sciences ( GILD ), Goldman Sachs ( GS ), Johnson & Johnson ( JNJ ), Keysight Technologies ( KEYS ), Laboratory Corp ( LH ), Littelfuse Inc. ( LFUS ), Manchester United ( MANU ), Masco Corp. ( MAS ), nVent Electric ( NVT ), and Walgreens Boots Alliance ( WBA ): These small (less than ~2% of the portfolio each) stakes were reduced during the quarter.

Note: They have significant ownership stakes in Manchester United and Adtalem Global Education.

Below is a spreadsheet that shows the changes to John Rogers’ Ariel Investments 13F portfolio holdings as of Q3 2022:

For further details see: