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Separately Managed Accounts
Ariel Micro-Cap Value
Invests in deeply undervalued micro-cap companies- > Ariel Small Cap Value
Invests in high quality, undervalued small companies
- > Ariel Small/Mid Cap Value
Invests in high quality, undervalued small- and medium-sized companies
- > Ariel Mid Cap Value
Invests in high quality, undervalued medium-sized companies
- > Ariel Focused Value
Invests in a concentrated number of high quality, undervalued medium- and large-sized companies
- > Ariel International Equity (DM)
Invests in undervalued, quality franchises in overseas markets
- > Ariel International Equity (DM/EM)
Invests in undervalued, quality franchises in overseas and emerging markets
- > Ariel Global Equity
Invests in undervalued, quality franchises in markets around the world
Mutual Funds
- > Ariel Fund
Invests in high quality, undervalued small- and medium-sized companies
- > Ariel Appreciation Fund
Invests in high quality, undervalued medium-sized companies
- > Ariel Focus Fund
Invests in a concentrated number of high quality, undervalued companies across all market capitalization ranges
- > Ariel Discovery Fund
Invests in deeply undervalued small companies
- > Ariel International Equity Fund
Invests in undervalued, quality franchises in overseas markets
- > Ariel Global Equity Fund
Invests in undervalued, quality franchises in markets around the world
- Performance
Our patient approach focuses on the long term, allowing us to take advantage of great buying opportunities that arise from Wall Street’s excessive focus on the short term and from the institutional neglect common with small cap stocks.
Ariel Discovery Fund searches for sound businesses trading below intrinsic value, which we believe is best determined by two factors: asset value and/or earnings power.
Asset Value
- A company’s assets as defined by tangible assets, unrecognized assets or franchise value are key to determining a margin of safety.
- In analyzing a company’s assets the following tools are most often used: price/tangible book value, price/net current assets and price/cash.
Earnings Power
- Earnings power, as evaluated by price/earnings, price/cash flow and EV/EBITDA, typically represent upside to the investment opportunity. For example, a common investment would be the purchase of a company trading below its liquid asset value, which is currently operating at roughly break-even. Expected improvement in operations then provides an inexpensive or even free "call option," with assets providing a margin of safety.
The portfolio managers bring a unique expertise in evaluating which metric is most useful in measuring a company’s value.
In addition to the above quantitative factors, we may also evaluate a company qualitatively by examining its product positioning, new product potential, quality of and ownership by the management team, as well as turnaround and/or takeover potential.
In the end, the intent is to make a sound investment which allows for a margin of safety.
Margin of Safety: Attempting to purchase with a margin of safety on price cannot protect investors from the volatility associated with stocks, incorrect assumptions or estimations on our part, declining fundamentals or external forces.
We believe ethical business practices make good investment sense.
We do not invest in corporations whose primary source of revenue is derived from:
- the production or sale of tobacco products or
- the manufacture of handguns.
Additionally, we consider a company’s environmental record which includes reviewing research from outside vendors that provide such services, and we encourage portfolio companies to have proactive diversity practices.
For more information, read The Responsibility Factor.
Investor Class: 01/31/2011
Institutional Class: 12/30/2011
Investor Class: ARDFX
Institutional Class: ADYIX
$15.4 million as of 3/31/2013
David Maley discusses his deep value approach to investing with Dow Jones Newswires.
[video] David Maley discusses his unique approach to selecting stocks with Morningstar.
Sector Weightings (%) as of March 31, 2013
| Ariel Discovery Fund | Russell 2000 Value | S&P 500 | |
|---|---|---|---|
| Consumer Discretionary | 20.80 | 12.61 | 13.61 |
| Financial Services | 18.98 | 37.86 | 17.19 |
| Producer Durables | 16.17 | 12.86 | 10.57 |
| Technology | 15.55 | 9.95 | 15.65 |
| Energy | 10.56 | 6.02 | 10.93 |
| Materials and Processing | 8.94 | 7.09 | 3.78 |
| Health Care | 5.44 | 4.67 | 12.37 |
| Utilities | 3.56 | 6.75 | 6.33 |
| Consumer Staples | 0.00 | 2.21 | 9.56 |
Represents percentage of total equity holdings in the portfolio
> View Historical Sector Diversification
Portfolio Characteristics as of March 31, 2013
| Market Capitalization | Ariel Discovery Fund | Russell 2000 Value | S&P 500 | |
|---|---|---|---|---|
| Market Capitalization | (In billions) | |||
| Large Capitalization | 64.31 & Above | 0.0 | 0.0 | 48.1 |
| Medium/Large Capitalization | 18.65 -- 64.31 | 0.0 | 0.0 | 31.4 |
| Medium Capitalization | 6.39 -- 18.65 | 0.0 | 0.0 | 18.1 |
| Medium/Small Capitalization | 2.39 -- 6.39 | 7.9 | 12.5 | 2.4 |
| Small Capitalization | 2.39 & Below | 92.1 | 87.5 | 0.0 |
| Dollar-Weighted Average (BIL)* | $0.35 | $1.04 | $58.72 | |
| Valuation Metrics | ||||
| Price/Book | 1.4 | 1.4 | 2.3 | |
| Price/Sales | 1.1 | 1.2 | 1.6 | |
| Trailing Price/Earnings | 65.0 | 23.3 | 17.0 | |
| P/E Excluding Negative Earnings | 15.1 | 17.1 | 16.5 | |
| Discount to Private Market Value | -32.2 | n/a | n/a | |
| Fundamentals | ||||
| Debt/Equity | 0.3 | 0.9 | 1.3 | |
| Portfolio Construction | ||||
| Number of Holdings | 37 | 1,403 | 500 | |
| Turnover | 23.8 | n/a | n/a | |
| Historical R-Squared vs. S&P 500 | 0.70 | n/a | n/a | |
| Historical R-Squared vs. Russell 2000 Value | 0.79 | n/a | n/a | |
> View Historical Portfolio Characteristics
Market Capitalization data, Valuation Metrics, Fundamentals and Number of Holdings are obtained from BNY Mellon. Portfolio Turnover is generated internally through Fiserv APL.
*Market Capitalization is a dollar-weighted average natural log. Using the natural log of each stock’s market capitalization reduces the weight given to the largest companies in a simple averaging process.
**This measure is not a forecast of the fund’s performance.
The Russell 2000® Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Russell® is a trademark of Russell Investment Group, which is the source and owner of the Russell Indexes’ trademarks, service marks and copyrights. The S&P 500® Index is the most widely accepted barometer of the market. It includes 500 blue chip, large cap stocks, which together represent about 75% of the total U.S. equities market.
The four-part process we follow emphasizes our disciplined philosophy, focusing on what matters most through independent thought and research.
The Idea: We screen more than 10,000 securities on size, valuation and industry parameters to yield roughly 2,000 issues. Of those we follow approximately 50 closely.
The Science: We quickly move to determine whether or not an idea is cheap enough via a deep value strategy focusing on book value (often 1x or below), tangible book value, cash and so forth. There are no rigid criteria to our analytical process; we are trying to determine that a margin of safety exists between price and intrinsic value.
The Art: We surround companies to paint a long-term picture and identify what others are missing. One key tool is our extensive independent verification network—the many outside experts we know well. Another tool is deciding the best methodology to determine whether a margin of safety exists.
The Decision: Once we have measured the gap between stock price and intrinsic value, we hold an informal discussion with any research members who are experts in the industry. After consultation with his portfolio manager, the lead portfolio manager makes the final decision on whether or not to initiate a position.
Margin of Safety: Attempting to purchase with a margin of safety on price cannot protect investors from the volatility associated with stocks, incorrect assumptions or estimations on our part, declining fundamentals or external forces.
Schedule of Holdings as of March 31, 2013
| Shares | Security Description | CUSIP | Ticker | Current Value ($) | % of Net Assets |
|
|---|---|---|---|---|---|---|
 |
||||||
| 50,600 | Mitcham Industries, Inc. | 606501104 | MIND | 856,152 | 5.6 | |
| 743,574 | Fixed Income Clearing Corporation | 85748R009 | 743,574 | 4.8 | ||
| 17,225 | Contango Oil & Gas Co. | 21075N204 | MCF | 690,550 | 4.5 | |
| 26,800 | First American Financial Corp. | 31847R102 | FAF | 685,276 | 4.5 | |
| 75,086 | Market Leader, Inc. | 57056R103 | LEDR | 672,771 | 4.4 | |
| 20,000 | International Speedway Corp. | 460335201 | ISCA | 653,600 | 4.2 | |
| 88,080 | PCTEL, Inc. | 69325Q105 | PCTI | 625,368 | 4.1 | |
| 38,900 | Rosetta Stone Inc. | 777780107 | RST | 598,282 | 3.9 | |
| 210,800 | Cowen Group, Inc. | 223622101 | COWN | 594,456 | 3.9 | |
| 141,100 | Vical Inc. | 925602104 | VICL | 561,578 | 3.6 | |
| 134,000 | Imation Corp. | 45245A107 | IMN | 511,880 | 3.3 | |
| 48,700 | XO Group Inc. | 983772104 | XOXO | 487,000 | 3.2 | |
| 20,000 | MB Financial, Inc. | 55264U108 | MBFI | 483,400 | 3.1 | |
| 8,100 | Madison Square Garden Co. | 55826P100 | MSG | 466,560 | 3.0 | |
| 28,297 | Erickson Air-Crane, Inc. | 29482P100 | EAC | 460,109 | 3.0 | |
| 31,099 | Landec Corp. | 514766104 | LNDC | 450,003 | 2.9 | |
| 103,800 | Gaiam, Inc. | 36268Q103 | GAIA | 435,960 | 2.8 | |
| 153,594 | Rentech, Inc. | 760112102 | RTK | 360,946 | 2.3 | |
| 12,300 | Brink's Co. | 109696104 | BCO | 347,598 | 2.3 | |
| 25,700 | AV Homes, Inc. | 00234P102 | AVHI | 342,581 | 2.2 | |
| 73,800 | Ballantyne Strong, Inc. | 058516105 | BTN | 312,174 | 2.0 | |
| 57,600 | Spartan Motors Inc. | 846819100 | SPAR | 305,856 | 2.0 | |
| 7,400 | Team, Inc. | 878155100 | TISI | 303,918 | 2.0 | |
| 119,334 | Orion Energy Systems, Inc. | 686275108 | OESX | 295,948 | 1.9 | |
| 30,600 | Astro-Med, Inc. | 04638F108 | ALOT | 293,148 | 1.9 | |
| 166,300 | Pendrell Corp. | 70686R104 | PCO | 276,058 | 1.8 | |
| 3,650 | Littelfuse, Inc. | 537008104 | LFUS | 247,652 | 1.6 | |
| 47,100 | ORBCOMM Inc. | 68555P100 | ORBC | 245,391 | 1.6 | |
| 12,800 | Tessera Technologies, Inc. | 88164L100 | TSRA | 240,000 | 1.6 | |
| 78,900 | ARC Document Solutions Inc. | 00191G103 | ARC | 235,122 | 1.5 | |
| 35,100 | Furmanite Corp. | 361086101 | FRM | 234,819 | 1.5 | |
| 44,500 | POZEN Inc. | 73941U102 | POZN | 234,515 | 1.5 | |
| 32,400 | Callaway Golf Co. | 131193104 | ELY | 214,488 | 1.4 | |
| 43,700 | Sigma Designs, Inc. | 826565103 | SIGM | 212,819 | 1.4 | |
| 6,600 | Simpson Manufacturing Co., Inc. | 829073105 | SSD | 202,026 | 1.3 | |
| 18,095 | JAKKS Pacific, Inc. | 47012E106 | JAKK | 189,817 | 1.2 | |
| 10,200 | Multi-Fineline Electronix, Inc. | 62541B101 | MFLX | 157,386 | 1.0 | |
| 29,700 | American Electric Technologies, Inc. | 025576109 | AETI | 155,034 | 1.0 | |
| Cash, Other Assets and Liabilities | 36,977 | 0.2 | ||||
| Grand Total | $15,420,792 | 100.0% | ||||
Ariel Discovery Fund Performance as of May 31, 2013
| Inception date: January 31, 2011 | Annualized | |||||
| One Month | Three Months | Year To Date | One Year | Since Inception | ||
|---|---|---|---|---|---|---|
| Ariel Discovery Fund | 3.47% | 11.09% | 17.27% | 24.82% | 8.99% | |
| Russell 2000® Value Index | 2.99% | 7.17% | 14.85% | 31.31% | 11.20% | |
| S&P 500® Index | 2.34% | 8.22% | 15.37% | 27.28% | 13.21% | |
Ariel Discovery Fund Performance as of March 31, 2013
| Inception date: January 31, 2011 | Annualized | |||||
| One Month | Three Months | Year To Date | One Year | Since Inception | ||
|---|---|---|---|---|---|---|
| Ariel Discovery Fund | 7.55% | 13.54% | 13.53% | 17.95% | 8.08% | |
| Russell 2000® Value Index | 4.16% | 11.63% | 11.63% | 18.09% | 10.65% | |
| S&P 500® Index | 3.75% | 10.61% | 10.61% | 13.96% | 12.09% | |
> View Historical Quarter-by-Quarter Performance
Gross Expense Ratio as of the fiscal year ended 9/30/12: 5.18%*
*Ariel Investments, LLC, the Adviser, is contractually obligated to waive fees or reimburse expenses in order to limit Ariel Discovery Fund’s total annual operating expenses to 1.50% of net assets for the Investor Class through the end of the fiscal year ending September 30, 2014. No termination of this agreement by either the Board of Trustees or the Adviser may be effective until, at the earliest, October 1, 2014.
Investing in small-cap stocks is more risky and volatile than investing in large-cap stocks. Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes the reinvestment of dividends and capital gains. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.
The Russell 2000® Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Russell® is a trademark of Russell Investment Group, which is the source and owner of the Russell Indexes’ trademarks, service marks and copyrights. The S&P 500® Index is the most widely accepted barometer of the market. It includes 500 blue chip, large cap stocks, which together represent about 75% of the total U.S. equities market.
Investors should consider carefully the investment objectives, risks, and charges and expenses before investing. For a current summary prospectus or full prospectus which contains this and other information about the funds offered by Ariel Investment Trust, call us at 800-292-7435 or click here. Please read the summary prospectus or full prospectus carefully before investing. Distributed by Ariel Distributors, LLC, a wholly-owned subsidiary of Ariel Investments, LLC.
