Charlie Bobrenskoi, director of Ariel Investments and portfolio manager at Ariel Fox Fund, says value stocks have outperformed growth stocks so far this year after a decade, and the new trend could continue. ((ARFFX) – Get the Ariel Focus Funds report.
“The classic Warren Buffett style is worth investing in,” Ariel said in an interview with TheStreet.com.
Ariel prefers high-quality companies that have short-term problems with lowering share prices. The company had 18 18 billion in assets under management as of Dec. 31.
“Value has the opportunity to recreate the history of the last 100 years,” Bobrinsky said. “There are a lot of great value-added stores to buy today.”
Inflation will remain high, he said, as interest rates continue to rise. One of the main reasons that growth stocks have outperformed value in recent years has been low interest rates.
They have created an income stream of growth stocks, which often does not come quickly, much more valuable. This is because the return of risk-free assets such as treasury bonds was low.
But as interest rates rise, growth stocks no longer have this advantage, creating opportunities for value stocks.
“As inflation raises its head, interest rates will rise sharply,” Bobrensky said. “The current earnings of our companies will be more valuable than the growth stock.”
Stocks that match the bull
With inflation and rising interest rates, “you will want companies that have real assets and current cash flow,” he said.
The two major reserves of the Ariel Fox Fund correspond to the following: APA ((APA) – Receive APA Corporation ReportOil producer, and Music ((MOS) – Receive music company reportWhich makes fertilizer.
“Real wealth on Earth rises in times of inflation,” Bobrinsky said. So it is not surprising that these two stocks have risen in recent months.
Fox Fund also has some financial services companies, which take advantage of rising interest rates and trade at lower values. Higher rates help banks because reserve prices generally grow much slower than lending and investment rates.
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A focus fund is financial protection Northern Belief ((NTRS) – Receive a report from the Northern Trust Corporation. The bank serves more than half of the Forbes 400, doing much better when interest rates rise and trading at 13.5 times its previous earnings, Bobrenskoi said.
Lazard ((LAZ) – Receive Lazard Ltd Class A Report, Boutique Investment Bank, is another financial stock of the Fox Fund. Bobrenskoi said it was trading at 6.8 times its previous earnings and was looking to change its corporate structure in a way that could boost stocks.
Carveouts and Spinoffs
Another topic for Fox Fund is carveouts and spinoffs.
Resideo technology ((REZI) – Get Resideo Technologies, Inc. Report Is the thermostat business that was taken out of Honeywell ((HON) – Receive Honeywell International Inc report.
“We like spin office because management is buried in groups,” Bobrinsky said. “They are not getting the attention and capital they deserve. Now they can allocate capital more efficiently.
Resido trades 12 times in future earnings.
Nelson ((NLSN) – Get the Nielsen Holdings Plc report.
“It’s very controversial. We like to buy what no one else does,” Bobrenskoye said. The pressure case for the stock is that people watch less TV, given the tendency to cut the wire and sting.
“But we believe the world doesn’t give up advertising, and someone has to measure it.” he said. Nelson has a new technology that can determine if a business is being implemented in a variety of media.
“We think it’s going to get better,” Bobrinsky said.
Last week, Nelson turned down a buy offer from a consortium, including active investor Elite Management.
“We think a deal will eventually be done, but if not, Nelson is worth an 11-fold advance,” Bobrinsky said.
The All-Cap Fox Fund, with 74 million in assets, generated a 3.74% year-over-year total return as of March 23, and an annual return of 9.67% over the past five years. This compares negative 6.19% and 15.77% for the S&P 500.