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John Rogers

As Markets Go ‘Crazy,’ Ariel Touts Old-School Value Strategy

The strategy, popularized by legendary investors Warren Buffett and Benjamin Graham, involves buying stocks whose worth might be underestimated by the market.

(Bloomberg) -- Markets are going “crazy” right now amid historic volatility, and this can turn out to be an opportunity to scoop up beaten-down value stocks, according to John Rogers at Ariel Investments. 

“I’m trying to find stocks that are selling at low multiples, that are selling at significant discounts to private-market value, companies that have strong balance sheets and strong moat around them,” the firm’s chairman said on Wednesday at the Bloomberg Invest conference. “We really are sticking to our tried-and-true principles, and that value really hasn’t changed.”

His view is counter to what David Einhorn said earlier this week. The hedge-fund manager pronounced the strategy may never again be in vogue -- adding that most value investors were being put out of business.

The strategy has been popularized by legendary investors Warren Buffett and Benjamin Graham and involves buying stocks whose worth might be underestimated by the market. Investors can become too focused on short-term trends, Rogers said, and those who are willing to look out three or five years may find opportunity still.

“We’ve never seen this kind of volatility, up and down, the ups and downs intraday, it’s something we’ve just never, ever experienced,” he said at the event. “But I think volatility should be your friend.”

Rogers said he likes Madison Square Garden Entertainment Corp., which is selling at over a 70% discount to its private-market value. “That rarely, if ever, has happened at Ariel where we find names that cheap,” he said. “The last time was in ‘08 and ‘09.” The company has an iconic property, he added, and people are looking to get back to concerts and sports games. 

He also likes Paramount Global, citing some downgrades from analysts recently. “Everyone hates it, and while everyone hates it, that creates opportunity, we think,” he said.

Both stocks are down almost 40% this year, compared with a 25% slide in the S&P 500.

“We found that if you’re willing to do your homework and buy more of those names that you truly believe in, it works out,” he said. “So we’re doing more trading because there’s more opportunity caused by this volatility.”

--With assistance from Caroline Hyde.

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