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The Bottom Line on Interest Rates: Discovering Overlooked Opportunities for Returns

Charles Bobrinskoy (Vice Chairman and Head of Investment Group) and InvestmentNews examine how falling rates tend to help companies with weak balance sheets.

General Disclosures:

The examples contained in this webinar are the presenter beliefs relating to the potential general effect of interest rates on the stock price companies with differing debt ratings. All information shown is hypothetical except for the stock price, which is purely a calculation of the earnings per share (EPS) multiplied by the price-to-earnings multiple (P/E Multiple). Examples are illustrative only and are not indicative of any specific return an investor may receive from a particular investment. The underlying assumptions are not predictive of the effect of future interest rates on any particular company. This commentary candidly discusses a number of individual companies. These opinions are current as of the date of this commentary but are subject to change. The information provided in this commentary does not provide information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security.

The various asset classes discussed by Mr. Bobrinskoy have different risks and benefits.  Investing in equity stocks is risky and subject to the volatility of the markets. Bonds are fixed income securities in that at the time of the purchase of a bond, the amount and timing of income payments are known. Bonds are subject to credit risk and interest rate risk, both of which may affect a bond’s investment value by resulting in lower bond prices or an eventual decrease in income. Treasury bonds are issued by the U.S. government for which payment of principal and interest is guaranteed, and interest earned is exempt from state and local taxes. A REIT (real estate investment trust) is a security that invests in real estate. REITs receive special tax considerations, have potentially high yields, and offer a liquid method of investing in real estate. Risks include interest rate and overdevelopment risk. Utility stocks are known as defensive stocks because they historically provide higher-than-average returns in a declining market. In addition, utility companies may return dividends that are likely to offset declines in the company’s stock prices. Risks of utility companies include the reduced potential for capital gain and the risk that the stocks may decline in value resulting in a loss.

Disclosures for Ariel Focus Fund:

Investing in equity stocks is risky and subject to the volatility of the markets. Investing in small and mid-size companies is riskier and more volatile than investing in large companies. The intrinsic value of the stocks in which the portfolio invests may never be recognized by the broader market. Ariel Focus Fund is a nondiversified fund and therefore may be subject to greater volatility than a more diversified investment.

Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes the reinvestment of dividends and capital gains and represents returns of the Investor Class shares. 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. Click here for the expense ratio for the year ended September 30, 2014 and standardize performance as of the most recent month end.

Portfolio holdings are subject to change. The performance of any single portfolio holding is no indication of the performance of other portfolio holdings of Ariel Focus Fund.  Specific stocks mentioned may be held in the Ariel Focus Fund or other portfolios Ariel manages.  Click here for the top ten holdings for Ariel’s mutual funds.

Investors should consider carefully the investment objectives, risks, and charges and expenses before investing. For a current prospectus or summary 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 prospectus or summary prospectus carefully before investing. Distributed by Ariel Distributors LLC, a wholly owned subsidiary of Ariel Investments LLC.

Hear more from Portfolio Manager Charlie Bobrinskoy:
Charlie's written analysis regarding the impact that changing interest rates can have on a company's value and performance.
Charlie Bobrinskoy discusses the six-year period since the March 9, 2009 market bottom and how investing has changed since the financial crisis.
Learn more about Charlie's Fund, Ariel Focus Fund:
An overview of Ariel Focus Fund, the Fund Charlie manages
Ariel Focus Fund fact sheet
Ariel Focus Fund holdings
Open a Focus Fund Account
Past performance does not guarantee future results. © Ariel Investments, LLC. This website and all of its content is for informational and educational purposes only and should not be considered to be investment advice or a recommendation to buy or sell any particular security. The mutual funds offered by Ariel Investment Trust are distributed by Ariel Distributors, LLC, a wholly-owned subsidiary of Ariel Investments, LLC. Use of this website is subject to our Terms & Conditions. The Ariel mutual funds referred to in this site may be offered only to persons in the United States. This web site should not be considered a solicitation or offering of any investment products, funds or services to ineligible investors, investors for whom such products, funds or services are not suitable, or investors outside the United States.

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