In this article, we discuss 10 stocks to buy according to John Rogers’ Ariel Investments.
John W. Rogers acquired an interest in stocks while at Princeton University. He majored in economics and later worked as a stockbroker for William Blair & Company for two years. John Rogers launched Ariel Investments in 1983, intending to focus on value investing in small and medium-sized businesses. Howard University’s $100,000 stock fund was his only large account when he began his investing firm. The hedge fund’s managed assets increased to $45 million between 1983 and 1986. Magnus Angenfelt’s book, The World’s 99 Greatest Investors, mentions John Rogers with famed investors like Warren Buffett, Sir John Templeton, and Ben Graham. He is presently Ariel Investments’ Co-CEO, Chairman, and Chief Information Officer.
Ariel Investments focuses on undervalued small and mid-cap companies with significant growth prospects. The fund’s primary investment criteria includes strong cash flows, low debt, and strong corporate fundamentals. As a result, the broader market may never understand the inherent worth of the stocks in which the fund invests. From 2000 through 2010, Ariel Investments’ flagship Ariel Fund returned 14.9% a year, compared to an 11.6% return for the Russell 2500 index. The Ariel Fund gained 2.38% in 2021, and its 5-year returns were 6.52%. Ariel International Fund has also achieved a 4.93% return since its debut in 2011.
Ariel Investments’ 13F portfolio worth is over $11.27 billion as of Q1 2022, down from $11.86 billion the previous quarter. Some of the most notable companies to buy, according to John Rogers’ Ariel Investments, included Bristol-Myers Squibb Company (NYSE:BMY), Verizon Communications Inc. (NYSE:VZ), and Johnson & Johnson (NYSE:JNJ).
John Rogers is bullish on Bristol-Myers Squibb Company (NYSE:BMY) as of the end of the first quarter of 2022. The fund increased its holding in Bristol-Myers Squibb Company (NYSE:BMY) by 1% in the first quarter, ending the period with 795,902 shares of the company. On May 26, Citi analyst Andrew Baum boosted his price objective on Bristol-Myers Squibb Company (NYSE:BMY) to $90 from $75, maintaining his Buy rating.
John Rogers of Ariel Investments
Ariel Investments also owns 835,766 shares of Verizon Communications Inc. (NYSE:VZ). On May 31, analyst Walter Piecyk of LightShed Partners initiated coverage of Verizon Communications Inc. (NYSE:VZ) with a Neutral rating. Given Verizon’s and the industry’s future potential, Piecyk thought the firm was appropriately priced at $52.50 per share.
Based on the 13F holdings for the first quarter of 2022, Ariel Investments owns 772,072 shares in Johnson & Johnson (NYSE:JNJ). David Risinger of SVB Leerink initiated coverage of Johnson & Johnson (NYSE:JNJ) on May 23, retaining an Outperform rating and a $200 price objective.
Our Methodology
With this industry outlook in mind, let’s start our list of 10 stocks to buy according to John Rogers’ Ariel Investments. We used Rogers’ 13F portfolio for Q1 2022 for this analysis.
Stocks to Buy According to John Rogers’ Ariel Investments
10. Jones Lang LaSalle Incorporated (NYSE:JLL)
Ariel Investments’ Stake Value: $272,105,000
Percentage of Ariel Investments’ 13F Portfolio: 2.41%
Number of Hedge Fund Holders: 35
Jones Lang LaSalle Incorporated (NYSE:JLL), based in the United Kingdom, is a worldwide commercial real estate services firm with offices in 80 countries. David Blood And Al Gore’s Generation Investment Management held a notable stake in Jones Lang LaSalle Incorporated (NYSE:JLL) at the end of the first quarter of 2022, valued at $1.10 billion.
Jones Lang LaSalle Incorporated (NYSE:JLL) was assigned a Sell rating and a $217 price objective by Goldman Sachs analyst Chandni Luthra on April 5. The analyst liked Jones Lang LaSalle Incorporated (NYSE:JLL)’s excellent market positioning and minimal leverage, although she predicted earnings to fall below the peer average in 2022.
By the end of Q1 2022, 35 hedge funds were long Jones Lang LaSalle Incorporated (NYSE:JLL), with stakes worth $2.15 billion. Of these, $272.11 million were attributed to Ariel Investments. The investment covered 2.41% of John Rogers’ 13F portfolio. The hedge fund boosted its stake in Jones Lang LaSalle Incorporated (NYSE:JLL) by 2% in the first quarter of 2022.
Along with Jones Lang LaSalle Incorporated (NYSE:JLL), Bristol-Myers Squibb Company (NYSE:BMY), Verizon Communications Inc. (NYSE:VZ), and Johnson & Johnson (NYSE:JNJ) are also some of the stocks to buy according to John Rogers’ Ariel Investments.
In its Q1 2022 investor letter, Baron Funds mentioned Jones Lang LaSalle Incorporated (NYSE:JLL). Here is what the fund said:
“Following strong share price performance in 2021, the shares of leading commercial real estate services firm, Jones Lang LaSalle Incorporated (NYSE:JLL) declined in the most recent quarter. We believe the current valuations of the company is compelling. Further, we believe the company is well-positioned to benefit from long-term growth opportunities that include a growing list of companies looking to outsource their commercial real estate needs, the growth in institutional ownership of commercial real estate, and attractive acquisition opportunities given their highly desirable global platforms and strong balance sheets.”
9. Kennametal Inc. (NYSE:KMT)
Ariel Investments’ Stake Value: $277,739,000
Percentage of Ariel Investments’ 13F Portfolio: 2.46%
Number of Hedge Fund Holders: 27
Kennametal Inc. (NYSE:KMT) is a company that specializes in the research and development of tungsten carbides, ceramics, and solutions for metal cutting and severe wear applications. Ariel Investments upped its stake in Kennametal Inc. (NYSE:KMT) in Q1 2022 by 9%. As a result, the fund’s position in the company were valued at $277.74 million.
Julian Mitchell of Barclays maintained an Equal Weight rating on Kennametal Inc. (NYSE:KMT) but lowered his price target to $28 from $30 on May 4. In the face of PMIs that are projected to continue to fall, the analyst predicted a lower growth forecast for multi-industry enterprises.
At the close of Q1 2022, 27 hedge funds held stakes in Kennametal Inc. (NYSE:KMT). The total value of these stakes was $374.83 million. This is compared to 17 hedge funds in the previous quarter with stakes worth $421.85 million.
8. Envista Holdings Corporation (NYSE:NVST)
Ariel Investments’ Stake Value: $281,219,000
Percentage of Ariel Investments’ 13F Portfolio: 2.49%
Number of Hedge Fund Holders: 37
Envista Holdings Corporation (NYSE:NVST) develops and sells dental solutions to diagnose, treat, and prevent dental problems. Following the Q1 data, Piper Sandler analyst Jason Bednar decreased his price objective on Envista Holdings Corporation (NYSE:NVST) to $49 from $50 and maintained a Neutral rating on the stock.
Envista Holdings Corporation (NYSE:NVST) on May 4 posted earnings for the first quarter of 2022. The reported EPS came in at $0.47, beating estimates by $0.04. Revenue over the period was $631.4 million, down 11% YoY, beating the analysts’ forecasts by $2.1 million.
Ariel Investments is the most significant stakeholder of Envista Holdings Corporation (NYSE:NVST). As of first quarter of 2022, John Rogers owned 5.77 million shares of Envista Holdings Corporation (NYSE:NVST), worth $281.22 million. The investment covered 2.49% of his 13F portfolio. By the end of Q1 2022, 37 hedge funds out of the elite 912 funds tracked by Insider Monkey held stakes in Envista Holdings Corporation (NYSE:NVST), worth $1.06 billion.
In its Q2 2021 investor letter Cooper Investors mentioned Envista Holdings Corporation (NYSE:NVST). Here is what the fund said:
“As noted in our previous update stock numbers in the Fund had become temporarily elevated due to participation in a number of spin-off and IPO opportunities. This has reduced back to 42 positions after three stocks were sold during the quarter with proceeds used to upsize recent investments, these sells (includes) Envista.
Envista, one of the world’s leading dental product companies, was spun out of portfolio holding Danaher in September ‘19. The Fund participated in the IPO at $20 and subsequently built up a position. Envista had been an underperforming asset inside Danaher with minimal growth and low teens EBIT margins but with the ‘focus dividend’ of being independent Envista had an opportunity to improve its growth rate and margins towards peer levels. Management have made great strides with growth turning positive and margins expanding to the high teens. In our view management have now executed on the low hanging fruit opportunities and with shares having responded positively we subsequently sold the position.”
7. Lazard Ltd (NYSE:LAZ)
Ariel Investments’ Stake Value: $295,335,000
Percentage of Ariel Investments’ 13F Portfolio: 2.61%
Number of Hedge Fund Holders: 14
Lazard Ltd (NYSE:LAZ) is a financial advising and asset management organization that caters to many customers, including enterprises, governments, institutions, partnerships, and individuals. On April 27, Lazard Ltd (NYSE:LAZ) issued a quarterly dividend of $0.47 per share, in line with the previous.
At the close of Q1 2022, 14 hedge funds were bullish on Lazard Ltd (NYSE:LAZ), with stakes worth $630.94 million. Of the 14 hedge funds that were bullish on Lazard Ltd (NYSE:LAZ), according to the first quarter database of Insider Monkey, John W. Rogers’ Ariel Investments is the leading stakeholder of the company. The hedge fund held a position worth $295.34 million in the company, up 6% from Q4 2021. Lazard Ltd (NYSE:LAZ) represents 2.61% of the hedge fund’s 13F portfolio.
Steven Chubak of Wolfe Research downgraded Lazard Ltd (NYSE:LAZ) from Peer Perform to Underperform with a $39 price objective on April 7. According to the analyst, the stock was downgraded ahead of the announcement of results to reflect pessimistic views on European acquisition activity and heightened recessionary risk.
In its Q4 2021 investor letter, Longleaf Partners Fund mentioned Lazard Ltd (NYSE:LAZ). Here is what the firm has to say:
“In Financials, we own asset manager Lazard and two newer companies, all three of which are harder to understand than the simpler banks that drove the sector. We are confident that this differentiated positioning that caused the relative drag this year will be the very driver of future absolute and relative outperformance.”
6. BOK Financial Corporation (NASDAQ:BOKF)
Ariel Investments’ Stake Value: $308,483,000
Percentage of Ariel Investments’ 13F Portfolio: 2.73%
Number of Hedge Fund Holders: 13
BOK Financial Corporation (NASDAQ:BOKF) is a holding company that provides financial services. Commercial Banking, Consumer Banking, Wealth Management, and Funds Management are the company’s segments. Ariel Investments is the leading shareholder of BOK Financial Corporation (NASDAQ:BOKF), with 3.28 million shares of the company, worth over $308.48 million. Next on the list is Diamond Hill Capital, which owned 992,892 shares of BOK Financial Corporation (NASDAQ:BOKF), worth over $93.28 million.
Truist analyst Jennifer Demba cut her price objective on BOK Financial Corporation (NASDAQ:BOKF) to $91 from $107 on April 29 and maintained a Hold rating on the stock. According to the analyst, BOK Financial Corporation (NASDAQ:BOKF)’s core loan balances grew considerably in Q1, but fee revenue would likely stay under pressure.
13 out of the 912 hedge funds held stakes in BOK Financial Corporation (NASDAQ:BOKF) in the first quarter of 2022, worth $364.90 million, compared to 14 funds in the preceding quarter holding stakes in BOK Financial Corporation (NASDAQ:BOKF) equalling $428.04 million.
In addition to Bristol-Myers Squibb Company (NYSE:BMY), Verizon Communications Inc. (NYSE:VZ), and Johnson & Johnson (NYSE:JNJ), BOK Financial Corporation (NASDAQ:BOKF) is one of the stocks in the Q1 portfolio of John Rogers’ Ariel Investments.
In its Q4 2021 investor letter, Ariel Investments mentioned BOK Financial Corporation (NASDAQ:BOKF) and discussed its stance on the firm. Here is what the fund said:
“Rising interest rates, after a surprisingly long period of low absolute rates and negative “real” rates, will create a headwind. While there has been much debate about the cause of these low rates, we believe the most important factor has been the $120 billion in monthly federal reserve open market bond purchases and the accumulation of an $8 trillion balance sheet. The former will end, and the latter will shrink. It is not just the Fed that has aggressively purchased bonds, bidding up prices and lowering yields. Bond traders and hedge fund managers have added to positions, confident that being on the same side as the Fed was the wise place to be. Now as the Fed is about to become a seller of bonds rather than a buyer, Wall Street’s “smart money” is likely to follow suit. Against this backdrop, fixed income securities and bond substitutes such as high dividend paying utilities and absolute return hedge funds are substantially overpriced and are not likely to produce attractive returns going forward.…” (Click here to see the full text)
5. Microsoft Corporation (NASDAQ:MSFT)
Ariel Investments’ Stake Value: $310,441,000
Percentage of Ariel Investments’ 13F Portfolio: 2.75%
Number of Hedge Fund Holders: 259
Microsoft Corporation (NASDAQ:MSFT) is a technology company that develops and supports software, services, and appliances. Ariel Investments initiated its position in Microsoft Corporation (NASDAQ:MSFT) during the fourth quarter of 2010, investing roughly $4.46 million. During Q1 2022, the hedge fund elevated its position in the company by 1%.
On May 23, Jefferies analyst Brent Thill decreased his price objective on Microsoft Corporation (NASDAQ:MSFT) from $400 to $325 while maintaining a Buy rating. Due to mounting economic headwinds and the approaching prospect of recession, Thill decreased his projections for the 28 software businesses he watches.
At the end of Q1 2022, 259 hedge funds tracked by Insider Monkey held stakes in Microsoft Corporation (NASDAQ:MSFT), down from 262 in the previous quarter. These stakes have a collective value of over $65.64 billion. Fisher Asset Management held the largest position in Microsoft Corporation (NASDAQ:MSFT) in Q1 2022, worth over $8.59 billion.
Here is what Motiwala Capital had to say about Microsoft Corporation (NASDAQ:MSFT) in its fourth-quarter 2021 investor letter:
“Microsoft (NASDAQ:MSFT) re-enters our portfolio after a long gap. MSFT sells enterprise and consumer software products as well as hardware products such as the Xbox video game console and Surface laptops. All business segments experienced double-digit revenue growth and earnings per share have compounded in the mid-double digits over the last 5 years. We believe MSFT continues this momentum in the years ahead.”
4. Philip Morris International Inc. (NYSE:PM)
Ariel Investments’ Stake Value: $344,868,000
Percentage of Ariel Investments’ 13F Portfolio: 3.05%
Number of Hedge Fund Holders: 55
Philip Morris International Inc. (NYSE:PM) is a holding corporation that produces and sells cigarettes, tobacco, and nicotine-based products. Philip Morris International Inc. (NYSE:PM) is the fourth-largest holding in the first quarter portfolio of John Rogers’ Ariel Investments. The hedge fund owned 3.67 million shares of Philip Morris International Inc. (NYSE:PM) in Q1 2022, worth $344.87 million, representing 3.05% of the total 13F portfolio.
At the end of Q1 2022, 55 hedge funds monitored by Insider Monkey were long Philip Morris International Inc. (NYSE:PM), up from 47 firms the previous quarter. The total stakes owned in the first quarter amounted to more than $6.64 billion, compared to $6.20 billion in the last quarter.
GQG Partners is Philip Morris International Inc. (NYSE:PM)’s largest shareholder, with shares worth $2.81 billion. On April 24, BofA analyst Lisa Lewandowski boosted her price objective on Philip Morris International Inc. (NYSE:PM) to $117 from $107 and retained a Buy rating on the stock. Despite the concerns, Philip Morris International Inc. (NYSE:PM) will shift its focus to other high-potential industries in 2022, according to the analyst, while coping with the temporary cost constraints of transferring manufacturing away from Russia.
Broyhill Asset Management mentioned Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter. Here is what the firm said:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
3. Baidu, Inc. (NASDAQ:BIDU)
Ariel Investments’ Stake Value: $349,165,000
Percentage of Ariel Investments’ 13F Portfolio: 3.09%
Number of Hedge Fund Holders: 47
Baidu, Inc. (NASDAQ:BIDU) is a Chinese tech company specializing in internet-related services and products. Susquehanna analyst Shyam Patil maintained a Positive rating on Baidu, Inc. (NASDAQ:BIDU) and a price objective of $200 on May 31. While the analyst is concerned by the epidemic and China’s macroeconomic circumstances, his long-term outlook on the firm has not changed.
On May 5, Baidu, Inc. (NASDAQ:BIDU) posted earnings for the first quarter of 2022. The earnings per average diluted share (EPADS) came in at $1.77, beating market predictions by $0.94. In addition, the revenue for the first three months of 2022 was $4.48 billion, above the market estimates by $320 million.
According to Insider Monkey’s first-quarter database, 47 hedge funds were bullish on Baidu, Inc. (NASDAQ:BIDU), compared to 38 funds in the preceding quarter. John W. Rogers’ Ariel Investments held the most significant position in Baidu, Inc. (NASDAQ:BIDU), with 2.64 million shares worth about $349.17 million.
Ariel Investments, in its third-quarter 2021 investor letter, mentioned Baidu, Inc. (NASDAQ:BIDU). Here is what the fund said:
“When we have such a high level of conviction for a company it is not uncommon for us to own it in size across our portfolios. Such is the case with technology giant Baidu, whose leading search engine has been dubbed the “Google of China.” This quarter shares sold off in sympathy with the Chinese internet sector as investors were rattled by the government’s sweeping regulatory crackdown intended to promote “common prosperity” by easing wealth inequality. While we recognize the greater political risk of investing in emerging markets such as China and incorporate an appropriately higher risk premium in the discount rate in our valuation models, we believe Baidu’s business strategy is aligned with national policies and prioritize and is therefore not adversely impacted unlike some other players in the internet sector who are in the eye of the storm.
Indeed, the Chinese government recognizes Baidu’s large, upfront investments in many next-generation artificial intelligence (AI) technologies and hails it as a national champion. For example, the company’s Advanced Driving Support System (ADAS), Apollo, has twice as much data on miles driven than any other initiative in the world, giving Baidu (and China) a large lead in the global AI arms race. In addition, Baidu’s cloud offering touts highly differentiated Platform as a Service (PaaS) features and capabilities for a demanding enterprise customer base. While these initiatives are a temporary drag on margins and require long-term execution, their success will bolster China’s “dual circulation” strategy aimed at spurring domestic demand, innovation and self-reliance.” (Click here to see the full text)
2. Mattel, Inc. (NASDAQ:MAT)
Ariel Investments’ Stake Value: $393,539,000
Percentage of Ariel Investments’ 13F Portfolio: 3.49%
Number of Hedge Fund Holders: 38
Mattel, Inc. (NASDAQ:MAT) is a toy company that creates, manufactures, and sells its products worldwide. North America, International, and American Girl are the company’s segments. As per Insider Monkey’s database for Q1 2022, 38 hedge funds held stakes in Mattel, Inc. (NASDAQ:MAT), up from 29 in the previous quarter. These stakes hold a total value of roughly $1.32 billion.
Mattel, Inc. (NASDAQ:MAT) has been a part of Ariel Investments’ portfolio since the fourth quarter of 2010. The hedge fund initiated its position in the company with shares worth over $27.12 million. At the end of Q1 2022, the fund held a $393.54 million stake in Mattel, Inc. (NASDAQ:MAT), which accounted for 3.49% of John Rogers’ portfolio.
In its Q4 2021 investor letter, Longleaf Partners Fund mentioned Mattel, Inc. (NASDAQ:MAT). Here is what the fund said:
“Mattel (24%, 1.40%; 16%, 0.96%), the global toy and media company, was a strong contributor in the fourth quarter and for the year. Despite store closures in Asia causing -20% regional revenues during the third quarter, Mattel’s consolidated sales still grew 8% due to its strong North American recovery. Barbie sales remain impressive as they have been for years, American Girl is finally returning to growth and Fisher Price is also recovering. The company is successfully passing through inflated costs with higher pricing and without losing volume. Despite the impressive results, the stock trades too low at less than 14x forward earnings, and that is before Mattel begins to monetize its massive non-earning asset Intellectual Property portfolio. Our appraisal of the value grew by more than 30% this year.”
1. Madison Square Garden Entertainment Corp. (NYSE:MSGE)
Ariel Investments’ Stake Value: $506,371,000
Percentage of Ariel Investments’ 13F Portfolio: 4.49%
Number of Hedge Fund Holders: 14
Madison Square Garden Entertainment Corp. (NYSE:MSGE) is a holding corporation that owns and runs Madison Square Garden. The company is divided into two segments – Entertainment and Tao Group Hospitality. In the first quarter earnings published on May 9 by Madison Square Garden Entertainment Corp. (NYSE:MSGE), $460.13 million revenue jumped 114.7% YoY.
On April 21, JPMorgan analyst David Karnovsky lowered his price target for Madison Square Garden Entertainment Corp. (NYSE:MSGE) from $79 to $76 while maintaining a Neutral rating. While the firm is well-positioned for a concert market recovery, Karnovsky warned investors in a research note that there will be some obstacles in the next 6-12 months, including a possibly large rollout for MSG Network and additional Sphere launch/content expenses.
Ariel Investments was the largest shareholder of Madison Square Garden Entertainment Corp. (NYSE:MSGE) in Q1 2022, holding stakes worth over $506.37 million. Overall, 14 hedge funds in Insider Monkey’s database held stakes worth roughly $645.19 million in Madison Square Garden Entertainment Corp. (NYSE:MSGE) in the first quarter of 2022. In the previous quarter, 17 hedge funds held stakes in the New York-based company, valued at $546.63 million.
Baron Funds mentioned Madison Square Garden Entertainment Corp. (NYSE:MSGE) in its Q1 2022 investor letter. Here is what the fund said:
“We recently acquired shares in Madison Square Garden Entertainment Corp. (“MSGE”) at what we believe was a highly discounted average price of only $68 per share. From its peak of $121 per share in March 2021, the stock declined more than 40% due to setbacks in indoor live entertainment amid the COVID-19 resurgence and real estate construction delays. The company owns iconic sports and entertainment real estate venues such as Madison Square Garden, the Chicago Theater, and is building a new state-of-the-art venue in Las Vegas, the MSG Sphere at The Venetian (slated to open in 2023). In addition, MSGE has long-term leases at Radio City Music Hall and the Beacon Theatre, while also maintaining a controlling stake in restaurant group TAO.…” (Click here to see the full text)
You can also take a peek at 10 Stocks to Sell According to Jinghua Yan’s TwinBeech Capital and 10 Best Stocks to Buy Now According to Tom Gayner’s Markel Gayner Asset Management.
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Disclosure: None. 10 Stocks to Buy According to John Rogers’ Ariel Investments is originally published on Insider Monkey.
