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Top 5 Buys of John Rogers' Ariel Investment

John Rogers (Trades, Portfolio), founder of Ariel Investment, disclosed last week that his firm's top five buys for the third quarter were The Interpublic Group of Companies Inc. (NYSE:IPG), Baidu Inc. (NASDAQ:BIDU), Mattel Inc. (NASDAQ:MAT), MSG Networks Inc. (NYSE:MSGN) and Phillip Morris International Inc. (NYSE:PM).

Ariel Investment concentrates its investments on small and medium-sized companies using an investing approach centered on patience, independent thinking and long-term outlook. The fund seeks companies with high barriers to entry, sustainable competitive advantages, predictable fundamentals and low forward price-earnings ratios.


As of quarter-end, Ariel Investment's $7.51 billion equity portfolio contains 144 stocks with a turnover ratio of 4%. The top three sectors in terms of portfolio weight are financial services, industrials and communication services.


Interpublic Group

Ariel added 1,817,253 shares of Interpublic Group, increasing the stake 25.04% and the equity portfolio 0.52%. Shares averaged $21.60 during the quarter.


The New York-based company provides traditional advertising services along with digital and other services like public relations. GuruFocus ranks Interpublic Group's profitability 8 out of 10 on the heels of expanding profit margins and a return on equity that outperforms 91.71% of global competitors.


Other gurus with holdings in Interpublic include Pioneer Investments (Trades, Portfolio) and 2019 Value Conference speaker Mario Gabelli (Trades, Portfolio).



Ariel added 230,768 shares of Baidu, increasing the position 13.97% and the equity portfolio 0.32%. Shares averaged $107.56 during the quarter.


The Beijing-based online media company operates several platforms, including a search engine, maps and an encyclopedia. GuruFocus ranks Baidu's financial strength 5 out of 10: While the company's Altman Z-score is a moderately weak 2.56, it has a weak Piotroski F-score of 2.


Other gurus with holdings in Baidu include Dodge & Cox and Sarah Ketterer (Trades, Portfolio).



Ariel added 1,674,949 shares of Mattel, increasing the stake 12.23% and the equity portfolio 0.25%. Shares averaged $11.41 during the quarter.


The El Segundo, California-based company manufactures toys, including brands like Barbie, Hot Wheels, Fisher-Price and American Girl. GuruFocus ranks Mattel's financial strength 3 out of 10 on several weak signs, which include debt ratios that underperform over 87% of global competitors. Despite this, Mattel's Piotroski F-score ranks a satisfactory 5 out of 9.


MSG Networks

Ariel added 1,114,747 shares of MSG Networks, increasing the stake 14.75% and the equity portfolio 0.24%. Shares averaged $17.91 during the quarter.


The New York-based company operates two regional sports and entertainment networks: MSG Network and MSG+. GuruFocus ranks the company's profitability 8 out of 10 on several positive investing signs, which include operating margins that have increased approximately 5.70% per year on average over the past five years and outperform over 98% of global competitors.


Phillip Morris

Ariel added 240,850 shares of Phillip Morris, increasing the holding 6.84% and the equity portfolio 0.24%. Shares averaged $79.16 during the quarter.


The New York-based company manufactures and sells cigarettes and other nicotine products. GuruFocus ranks the company's profitability 8 out of 10 on several positive investing signs, which include operating margins that outperform over 82.35% of global competitors despite contracting approximately 2.10% per year on average over the past five years. Additionally, Phillip Morris has a strong Piotroski F-score of 7.


See also

We are pleased to have Rupal Bhansali, chief investment officer of Ariel's international and global equity strategies, as one of our speakers at the 2020 GuruFocus Value Conference. Bhansali started her buy-side career at George Soros (Trades, Portfolio)' Soros Fund Management and has outperformed the benchmarks over the past 20 years. Register early for the conference and receive $300 off the regular price.

Disclosure: No positions.

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This article first appeared on GuruFocus.