"Tracking John Rogers’ Ariel Investments Portfolio – Q4 2019 Update"
"Ariel Investments’ 13F portfolio value increased from $7.51B to $7.97B this quarter.They increased Nielson Holdings while dropping Thermo Fisher Scientific during the quarter.The top three positions are Microsoft, Philip Morris, and Baidu and they add up to ~12% of the portfolio.This article is first in a series that provides an ongoing analysis of the changes made to Ariel Investments’ 13F stock portfolio on a quarterly basis. It is based on Ariel Investments’ regulatory  filed on 02/14/2020. John Rogers’ 13F portfolio value increased ~6% from $7.51B to $7.97B this quarter. The portfolio is diversified with recent 13F reports showing around 150 positions. There are 68 securities that are significantly large (more than ~0.5% of the portfolio each) and they are the focus of this article. The largest five stakes are Microsoft Corp, Philip Morris, Baidu Inc., Lazard Ltd., and Kennametal Inc. They add up to ~17% of the portfolio.John Rogers founded Ariel Investments in 1983 as a small and mid-cap value investment firm. They currently have ~$13B under management. The assets are now distributed among several mutual funds and separately managed accounts with the bulk invested in the small and mid-cap areas. Their flag ship mutual fund is the Ariel Fund (ARGFX) incepted in 1986. Ariel Fund has produced alpha during its lifetime – 11.02% annualized return compared to 10.72% for the Russell 2500 Index and 10.56% for the S&P 500 Index. It has however underperformed in the most recent 10-year period. The other mutual funds in the group are Ariel Appreciation Fund (CAAPX), Ariel Focus Fund (ARFFX), Ariel International Fund (AINTX), and Ariel Global Fund (AGLOX).Note: Some of the top holdings in their International and Global funds are not in the 13F report as they are not 13F securities. They are Deutsche Boerse AG (DBOEY), Roche Holding AG (RHHBY), Nintendo Company (NTDOY), Koninklijke Ahold Delhaize (ADRNY), Michelin (MGDDY), NTT Docomo (DCMYY), Nippon Telegraph & Telephone (NTTYY).New Stakes:None.Stake Disposals:Thermo Fisher Scientific (TMO) and Viacom (VIAB): TMO was a huge position first purchased in 2006 at prices between ~$30 and ~$45. By EOY 2018, that original stake was sold down from 3.4M shares to just over 180K shares thru periodic selling. Last four quarters saw the remaining stake disposed at prices between $220 and $328. The stock currently trades at $281. Ariel Investments harvested huge long-term gains. The Viacom stake got disposed as CBS Corporation merged with Viacom to form ViacomCBS (exchange ratio 1:0.59625) in an all-stock transaction that closed in December.Stake Increases:Philip Morris (PM): A very small position in PM was first purchased in 2013. By 2017, the position was built to a ~1M share stake. Next year saw the position increased by ~220% at prices between $66 and $110. Last four quarters have seen another ~20% stake increase at prices between $70 and $91. The stock currently trades near the low end of those ranges at $66.43 and it is a top-three stake at ~4% of the portfolio.Kennametal Inc. (KMT): KMT is a top-five 2.66% of the portfolio position. It was established in 2014 at prices between $34 and $52. The position has seen minor buying over the years. Last four quarters saw a ~6% stake increase. The stock currently trades at well below their purchase price ranges at $17.69.Note: Ariel Investments has a ~7% ownership stake in Kennametal Inc.Interpublic Group (IPG): The 2.63% IPG stake is a very long-term position that goes back almost two decades. It was first purchased in 2001 and the position was built to over 41M shares by 2005 at prices between $9 and $42. Since then, the stake has wavered. Recent activity follows: 2018 saw a ~20% selling at prices between $20 and $25. Last four quarters have seen a ~40% stake increase at prices between $19.50 and $24. The stock currently trades at $14.10.KKR & Company (KKR): KKR is a ~2% of the portfolio position purchased in 2011 at prices between $10.50 and $19. The position has remained relatively steady over the years although most quarters have seen minor adjustments. Last four quarters saw a ~4% stake increase. The stock currently trades at $20.60.ViacomCBS Inc. (VIAC) previously CBS Corporation (CBS): The original CBS position goes back to 2006 when around 6.2M shares were purchased at prices between $24 and $32. The position size peaked at over 13M shares in 2008. That year saw a ~175% stake increase at prices between $5 and $25. Last December, CBS Corporation merged with Viacom to form ViacomCBS. Ariel Investments also had a position in Viacom for which they got shares in the combined business in the ratio 1:0.59625. Including that, the quarter saw a minor stake increase during the quarter. The stock is currently at $12.62.Snap-On Inc. (SNA): SNA is a ~2% of the portfolio stake purchased in 2012 at prices between ~$52 and ~$80. Next year saw a ~50% stake increase at prices between ~$80 and ~$110. The next few years saw minor selling while last year there was a ~12% stake increase. The stock currently trades at $107.Gilead Sciences (GILD): A very small stake in GILD was first purchased in 2012. The position has seen consistent increases every year since. 2014-2015 and 2017 saw bulk buying at prices between ~$65 and ~$120. The stock currently trades at $78.55.Nielsen Holdings (NLSN): The ~2% NLSN stake was purchased in 2017 at prices between ~$36 and ~$45. Next year saw a ~60% stake increase at prices between $22 and $37.50 and that was followed with a ~45% further increase over the last four quarters at prices between $19.50 and $27. The stock currently trades well below the low end of their purchase price ranges at $15.14.MSG Networks (MSGN): The MSG Networks position goes back to 2011 when the company was called Madison Square Garden. It was established at prices between $6.75 and $8.50. 2013 saw a one-third selling at prices between $13.50 and $19. Following the Madison Square Garden split-off in 2015, the position was increased from ~1.6M shares to almost 9M shares by 2017 at prices between ~$15 and ~$26. Next year saw a ~23% reduction at prices between ~$19 and ~$27 while the last four quarters saw a similar increase at prices between ~$14 and ~$25. The stock is currently at $12.14.Jones Lang LaSalle (JLL): The 1.77% JLL position is a very long-term stake first purchased in 2001. Next year saw a huge stake build-up at prices between ~$14.50 and ~$25. The position has seen selling since 2004. The bulk of the selling happened in 2006 at prices between ~$55 and ~$93. The last decade had also seen consistent selling almost every year while the last four quarters saw a combined ~10% stake increase. The stock currently trades at ~$100.Johnson & Johnson (JNJ), Berkshire Hathaway (BRK.B), Charles River Laboratories (CRL), BOK Financial (BOKF), Tegna Inc. (TGNA), Molson Coors (TAP), Mohawk Industries (MHK), Verizon Communications (VZ), Royal Caribbean Cruises (RCL), and BorgWarner Inc. (BWA): These small (less than ~1.5% of the portfolio each) stakes were increased during the quarter.Bio-Rad Laboratories (BIO), Littelfuse Inc. (LFUS), Masco Corp. (MAS), Adtalem Global Education (ATGE), The Madison Square Garden (MSG), Affiliated Managers Group (AMG), Brink’s Co (BCO), National Oilwell Varco (NOV), Western Union (WU), and CarMax (KMX): These very small (less than ~1% of the portfolio each) positions saw increases during the quarter.Stake Decreases:Microsoft Corp (MSFT): MSFT is currently the top position at 4.14% of the 13F portfolio. It was a very small stake first purchased in 2010. The 2013-2015 timeframe saw a 2.2M share build-up at prices between ~$26 and ~$56. Since then, the stake has wavered. Recent activity follows: last four quarters have seen a ~22% reduction at prices between ~$100 and $160. The stock currently trades at $143.Baidu Inc. (BIDU): BIDU is a top-three position at ~3% of the 13F portfolio. It was established in 2013 with the bulk of the current position purchased in 2015 at prices between ~$134 and ~$234. The interim years had seen minor buying and in 2018 there was a ~25% increase at prices between $157 and $273. Q1 to Q3 2019 saw another one-third increase at prices between ~$97 and ~$142. The stock currently trades at $89.62. This quarter saw minor trimming.Lazard Ltd. (LAZ): LAZ is a top-five 2.73% of the portfolio position first purchased in 2009 at prices between ~$19 and ~$38. Next year saw a stake-tripling at prices between ~$25 and ~$36. The interim period saw further buying but in 2014 there was a ~25% selling at prices between ~$39 and ~$50. Since then, the stake has remained relatively steady although adjustments were made every quarter. Last year saw a ~15% combined increase at prices between ~$31 and ~$40.50. The stock is now at $24.90.Note: Ariel Investments have a ~5% ownership stake in Ariel Investments.First American Financial (FAF): FAF is a 2.63% of the portfolio stake established in 2011 at prices between ~$11 and ~$17. 2013 also saw a ~25% stake increase at prices between ~$21 and ~$28. The stake has seen consistent reductions since 2015. Recent activity follows: last four quarters have seen a ~20% selling at prices between ~$45 and ~$64. The stock is now at $37.43.Stericycle Inc. (SRCL): SRCL is a 2.62% of the portfolio position established in Q1 2018 at prices between ~$58 and ~$76. The bulk of the current stake was purchased in H2 2018 at prices between ~$36.50 and ~$71. The stock currently trades at $48.85. Last four quarters have seen a ~10% trimming.Mattel Inc. (MAT): The 2.60% MAT position was first purchased in 2016 at prices between ~$25 and ~$34. Next year saw a stake doubling at prices between ~$13 and ~$30.50. 2018 also saw a one-third stake increase at prices between ~$9.50 and ~$18. Q1 2019 saw a ~12% trimming while the next two quarters saw another one-third increase at prices between ~$9.50 and ~$14.50. The stock currently trades at $8.50.Northern Trust (NTRS): NTRS is a 2.38% very long-term position first purchased in 2002. The 2002-2004 timeframe saw a ~10M share stake built at prices between ~$30 and ~$60. The position has since been sold down. The bulk of the selling was in the 2005-2007 timeframe at prices between ~$42 and ~$81. Recent activity follows: 2018 saw a ~7% trimming at prices between ~$79 and ~$111 while the last four quarters have seen a minor increase. The stock currently trades at $67.41.Laboratory Corp (LH): LH is a ~2% of the portfolio stake first purchased in 2008 at prices between ~$60 and ~$80. That original stake was sold out in 2011 at prices between ~$73 and ~$101. 2014 saw a larger position rebuilt at prices between ~$89 and ~$111. Next year also saw a ~30% stake increase at prices between ~$112 and ~$127. Last four years have seen consistent selling. The stake was reduced by ~50% over that period at prices between ~$103 and $190. The stock currently trades at ~$115.Keysight Technologies (KEYS), Zebra Technology (ZBRA), CBRE Group (CBRE), Simpson Manufacturing (SSD), Stanley Black & Decker (SWK), and Aflac Inc. (AFL): These small positions (less than ~1.5% of the portfolio each) were reduced during the quarter.Zimmer Biomet Holdings (ZBH), Knowles Corp (KN), Amdocs Ltd. (DOX), Schlumberger Ltd. (SLB), MTS Systems (MTSC), Progressive Corp (PGR), Nokia Corp (NOK), US Silica Holdings (SLCA), Pioneer Natural Resources (PNQ), GlaxoSmithKline plc (GSK), Willis Towers Watson (WLTW), Houlihan Lokey (HLI), Omnicom Group (OMC)m and Janus Henderson Group (JHG): These very small positions (less than ~1% of the portfolio each) were reduced during the quarter.Quest Diagnostics (DGX), Illinois Tool Works (ITW), Generac Holdings (GNRC), China Mobile (CHL), Cardinal Health (CAH), Fluor Corp (FLR), and Anixter International (AXE): These minutely small (less than ~0.5% of the portfolio each) stakes were reduced this quarter.Kept Steady:None.Note: Although the position sizes relative to the 13F portfolio are very small, Ariel Investments have significant ownership stakes in the following small-cap businesses -  4.6% of Kindred Biosciences (KIN), 15.4% of Glassbridge Enterprises (GLAE), 6.4% of GAIA Inc. (GAIA), 3.4% of Emcore (EMKR), 1.7% of CPI Aerostructures (CVU), ~1% of Capital Southwest (CSWC), 6.7% of Cumberland Pharma (CPIX), 2.5% of Cowen Inc. (COWN), 4.1% of Century Casinos (CNTY), 23.2% of Ballantyne Strong (BTN), 4.8% of Atronova (ALOT), 4.4% of Acacia Research (ACTG), 9.6% of 180 degree capital (TURN), 6.1% of Strattec Security (STRT), 14.7% of U.S. Silica Holdings (SLCA), 15.8% of RealNetworks (RNWK), 2.9% of Rubicon Technology (RBCN), 11.5% of Perceptron (PRCP), 1.4% of Orion Energy (OESX), 7.5% of MTS Systems (MTSC), 18.7% of MSG Networks (MSGN), 23.6% of Mitcham Industries (MIND), 5.2% of Lazard Ltd. (LAZ), 6.9% of Kennametal Inc. (KMT), 1.7% of Lake Industries (LAKE), 3.4% of Synacor (SYNC), 2.4% of GSI Technology (GSIT), and 2.1% of Alithya Group (ALYA).Below is a spreadsheet that shows the changes to John Rogers’ Ariel Investments 13F portfolio holdings as of Q4 2019:"