Tracking John Rogers’ Ariel Investments Portfolio – Q1 2023 Update (MUTF:ARAIX)

Alex Wong

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 5/12/2023. John Rogers’ 13F portfolio value increased ~6% from $9.85B to $10.41B this quarter. The portfolio is diversified with recent 13F reports showing around 150 positions. There are 60 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, Madison Square Garden Entertainment, Mattel, Philip Morris, and Kennametal. They add up to ~17% 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 Q4 2022.

Their flagship mutual fund is the Ariel Fund (MUTF:ARGFX) incepted in 1986. Ariel Fund has a lifetime annualized return of 10.61% compared to 10.20% for the Russell 2500 Index and 10.48% for the S&P 500 Index. In the most recent 10-year period, it has underperformed the S&P 500 index 8.97 % vs 12.20%. 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 Deutsche Boerse AG (OTCPK:DBOEY), Roche Holding AG (OTCQX:RHHBY), Michelin (OTCPK:MGDDY), Endesa SA (OTCPK:ELEZF), Koninklijke Ahold Delhaize (OTCQX:ADRNY), Snam SpA (OTCPK:SNMRY), and Subaru (OTCPK:FUJHY).

Stake Increases:

Mattel Inc. (MAT): The large (top three) 2.88% 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. The last several quarters have seen only minor adjustments. The stock currently trades at $17.86.

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

Resideo Technologies (REZI): The 2.48% REZI stake was built during the three quarters through Q2 2022 at prices between ~$19.50 and ~$28 and the stock currently trades at $16.57. There were minor increases in the last three quarters.

Note: They have a ~9.4% ownership stake in the business.

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 $26.61. The last several quarters have seen only minor adjustments.

Jones Lang LaSalle (JLL): The ~2% 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. That was followed with a ~11% increase this quarter at prices between ~$137 and ~$185. The stock currently trades at ~$141.

Northern Trust (NTRS): NTRS is a ~2% 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. The last several quarters have seen only minor adjustments. The stock currently trades at ~$72.

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 ~$95. There were minor increases in the last four quarters.

Credicorp Ltd. (BAP), Generac Holdings (GNRC), and Leslie’s (LESL): These stakes saw substantial increases this quarter. The 1.85% BAP stake saw a ~40% increase at prices between ~$124 and ~$149 and the stock currently trades at ~$134. GNRC is a 1.73% stake that saw a ~27% increase this quarter at prices between ~$98 and ~$135. The stock is now at ~$116. LESL is a 1.25% position primarily built this quarter at prices between ~$10.50 and ~$16.75. It now goes for $9.24.

Adtalem Global Education (ATGE), ADT Inc. (ADT), Aflac Inc. (AFL), Charles Schwab (SCHW), Carlyle Group (CG), CarMax Inc. (KMX), Charles River Laboratories (CRL), Envista Holdings (NVST), Equity Commonwealth (EQC), Janus Henderson Group (JHG), Johnson & Johnson (JNJ), Laboratory Corp (LH), Lindblad Expeditions (LIND), Simpson Manufacturing (SSD), Prestige Consumer Healthcare (PBH), and Verizon Communications (VZ): These small (less than ~2% of the portfolio each) stakes were increased during the quarter.

Note: Ariel Investments has a significant ownership stake in Adtalem Global Education.

Stake Decreases:

Baidu Inc. (BIDU): BIDU is currently the largest 13F position at 4.11% 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. Last year saw a ~18% further increase at prices between ~$79 and ~$161. The stock currently trades at ~$119. There was marginal trimming this quarter.

Madison Square Garden Entertainment (MSGE): MSGE is currently a large (top three) 13F stake at 3.78% of the portfolio. It was built over the seven quarters through Q4 2021 at prices between ~$27 and ~$79. The stock currently trades at ~$35.71. The last four quarters have seen only minor adjustments.

Note: Ariel Investments has a ~5.4% ownership stake in Madison Square Garden Entertainment. The prices quoted above are adjusted for the Sphere Entertainment (SPHR) spin-off in April.

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 saw 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. That was followed with a similar reduction this quarter at prices between ~$90 and ~$105. The stock currently trades at ~$91, and it is at 2.74% of the portfolio.

Kennametal Inc. (KMT): KMT is a 2.70% 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 $25.92. The last six quarters saw only minor adjustments.

Note: Ariel Investments has a ~12.5% ownership stake in Kennametal Inc.

Microsoft Corp (MSFT): MSFT is now at 2.42% 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 ~$326. This quarter saw a ~13% trimming. They are harvesting gains.

Lazard Ltd. (LAZ): LAZ is a 2.71% 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 $28.15. There was a ~18% trimming in the last three quarters.

Note: Ariel Investments have a ~7% ownership stake in Lazard.

First American Financial (FAF): FAF is a 2.14% 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 $54.63. The last four quarters have seen only minor adjustments.

Interpublic Group (IPG): The 2.10% 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 $37.49. The next two quarters saw a ~15% increase while the last two quarters saw a one-third reduction.

BOK Financial (BOKF): The ~2% BOKF stake was built during the 2019 to 2021 timeframe at prices between ~$37 and ~$116. The stock currently trades at ~$82. There was a ~13% trimming last quarter at prices between ~$89 and ~$110. That was followed with a minor ~3% trimming this quarter.

Affiliated Managers Group (AMG), Amdocs Ltd. (DOX), Axalta Coating (AXTA), BorgWarner Inc. (BWA), Boyd Gaming (BYD), Brink’s Co (BCO), Bristol Myers Squibb (BMY), CBRE Group (CBRE), Check Point Software (CHKP), Core Laboratories (CLB), Gilead Sciences (GILD), Goldman Sachs (GS), Masco Corp. (MAS), Littelfuse Inc. (LFUS), Knowles Corp (KN), Madison Square Garden Sports (MSGS), Manchester United (MANU), nVent Electric (NVT), Norwegian Cruise Line Holdings (NCLH), OneSpaWorld Holdings (OSW), Paramount Global (PARA) previously ViacomCBS, Royal Caribbean Cruises Ltd. (RCL), Snap-on Inc. (SNA), Stericycle Inc. (SRCL), and Zebra Technologies (ZBRA): These small (less than ~2% of the portfolio each) stakes were reduced during the quarter.

Note: They have significant ownership stakes in Knowles Corp, Madison Square Garden Sports, Manchester United and OneSpaWorld Holdings.