TO: Clients and Friends of Ariel Investments, LLC
FROM: Mellody Hobson, Co-CEO and President
DATE: January 12, 2021
RE: Invaluable Insights Part II – Recap
Last week, we hosted the second installment of “Invaluable Insights,” a virtual gathering of legendary value investors from Ariel Investments, Artisan Partners, GAMCO Investors, Harris Associates, Miller Value Partners and Southeastern Asset Management.
With an average tenure of 34 years and over $300 billion in collective assets under management, this group represents some of the most successful value investors in the country.
In this far-reaching and thoughtful conversation, we discussed the following:
Predictions for 2021:
- After a period of tremendous economic dislocation, expect a consumption boom this year. Daniel O’Keefe, Managing Director at Artisan Partners, predicts a significant amount of money will pour into discretionary spending areas, such as travel and leisure, once the “coast is clear.”
- Rupal Bhansali, CIO and Portfolio Manager of Global Equities at Ariel Investments, expects the China recovery to continue, which will likely have a salutary effect on other countries.
- Ariel Co-CEO, John Rogers, predicts interest rates will rise sooner than anticipated – potentially in the next year.
- The group agreed: More economic stimulus will be necessary in 2021, and it should be targeted to those who need it most.
The market’s reaction to civil unrest as the U.S. transitions to a new presidential administration:
- David Herro, Partner and CIO at Harris Associates, was not surprised by the market’s lack of a reaction to the events on Capitol Hill. He believes investors likely saw this as a temporary phenomenon.
- Bill Miller, Founder of Miller Value Partners, reminded the group that the underpinnings of the U.S. economy remain unchanged, so the market can “look right through” these events.
Value vs. growth:
- There was broad consensus that value will outperform growth and now is the time to aggressively buy value. Expect to see small-cap value stocks that have been left behind over the past decade take the lead.
- Bill Miller predicts growth stocks will also continue to do well in a broad bull market, but David Herro said they are too big to keep outperforming, saying, “the math just isn’t there.”
Investors cautious on Bitcoin overall, with one exception:
- The sole Bitcoin holder in the group, Bill Miller, predicts cash will be “killed by Bitcoin” because the government wants you to lose money in cash for the foreseeable future. He sees digital currency gaining broader acceptance every day.
- Mario Gabelli, Chairman and CEO of GAMCO Investors, has his eye on China and expects President Xi to take a greater role in controlling Bitcoin over the next five years.
Lightening round stock and sector picks:
- When asked to choose between Tesla or Daimler shares, the group unanimously chose Daimler, which manufactures Mercedes Benz.
- Between Amazon and luxury retailer, LVMH, the group was split 50/50, with Staley Cates, David Herro and Daniel O’Keefe favoring LVMH.
- Between banks and asset managers, the group was again split down the middle, with David Herro, Mario Gabelli and Daniel O’Keefe buying banks.
- There were mixed feelings on the energy sector. Half of participants, including Ariel’s own John Rogers and Rupal Bhansali, called the sector a buy, and the other half suggested a hold.
In this discussion, the portfolio managers at Ariel Investments and other value investing firms candidly discuss individual securities, sectors, and markets. The opinions expressed are current as of the date of the interview, but are subject to change. The information provided does not constitute information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. This material should not be considered an offer for any of the securities referenced. The information contained in the interview is not guaranteed as to its accuracy or completeness.