Value Investing October 22 nd, 2010 Presented by Jason J. Tyler.

Value InvestingOctober 22nd, 2010

Presented by

Jason J. Tyler

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• Investment Styles

• How does Ariel Practice Value Investing?

• Investment Management

• Lab School Value Investing

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Investment types

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Investment styles

Active Passive

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Investment styles

DiversifiedConcentrated

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Investment styles

Growth Value

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Investment styles

Small Cap Mid Cap Large Cap

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Investment styles

Equities Bonds, Commodities,

Real Estate, Derivatives

Active Passive

Concentrated Diversified

Value Growth

Micro Small Mid Large

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Markets are very Efficient….

“In the short

term, the market is a voting machine

…”

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But do provide moments of Opportunity

“But in the long run it

is a weighing machine”

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Winners identify Greed and Fear

“Be greedy when others are fearful and fearful when

others are greedy”

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Value investors specialize in fear

Greed Fear

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Value Investing works over time

• From 1957-2003, the lowest quintile P/E stocks outperformed the S&P 500 by nearly 300 bps annually, and outperformed the highest P/E quintile by nearly 500 bps annually.

• Even over more recent time horizons, it is clear that low P/E stocks outperform:

• Even Fama and French - the most loyal disciples of EMH - confirmed in the early 1990’s that low P/E stocks outperform high P/E stocks – and that risk is not the reason

Low 2nd 3rd 4th High Return (%) 19.0 17.4 14.6 13.1 12.3

Returns (1970-1996)

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Groupthink – Fear of being wrong

FearGroupthink

Loss Aversion

Recency Bias

Standing Still

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Groupthink – Fear of being wrong

FearGroupthink

Loss Aversion

Recency Bias

Standing Still

http://www.youtube.com/watch?v=iRh5qy09nNw

http://www.youtube.com/watch?v=iRh5qy09nNw

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Bubbles: Housing & Technology

FearGroupthink

Loss Aversion

Recency Bias

Standing Still

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Loss AversionFearGroupthink

Loss Aversion

Recency Bias

Standing Still

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Recency Bias – fear of change

FearGroupthink

Loss Aversion

Recency Bias

Standing Still

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Recency Bias – fear of change

75% of S&P 500 topped analysts’ estimates in 2Q10

FearGroupthink

Loss Aversion

Recency Bias

Standing Still

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Fear of standing still

“The best holding period is forever”

FearGroupthink

Loss Aversion

Recency Bias

Standing Still

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Fear of standing still

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Very few managers beat the market over long stretches

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What it takes to be an analyst

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Lab School exists in the heart of Ariel….

• Senior Vice President – Jason Tyler• Research Analyst – Russell Kohn• Information Technology – Xander Meadow• Director & Corporate Liaison – Tai Duncan• Interns – Priyanka Rupani, Ben Picker, Lauren Stewart,

Jacqueline Chaudhry, Michael Hernandez, Nick Sisodia, Jaya Sah, Rui Lou, Angel Pu, Mario Gage, Anchellie Akuamoah, Danielle Kutasov & John Kinsella

Founder, CEOJohn

Rogers

Vice ChairmanCharlie

Bobrinskoy

Director Bob Solomon

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It is all about seeing the future…

• Founded in 1925• Leading food and beverage

company• Experienced, well-respected

management team

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©FactSet Research SystemsData Source: FactSet Prices

Dean Foods Co. (DF)30-Apr-1996 to 28-Sep-2007 (Monthly) High: 46.74 Low: 4.03 Latest: 25.58

Price (USD)

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Seeing the future…..to be updated

• Fashion retailer, selling clothes, shoes and accessories

• Industry-leading customer loyalty due to extraordinary customer service

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Nordstrom Inc. (JWN)31-Dec-1984 to 30-Nov-2007 (Monthly) High: 55.71 Low: 1.94 Latest: 33.54

Price (USD)

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It is all about seeing the future…

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Dean Foods Co. (DF)30-Apr-1996 to 18-Oct-2010 (Monthly) High: 46.74 Low: 4.03 Latest: 10.66

Price (USD)

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Seeing the future

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Nordstrom Inc. (JWN)31-Dec-1984 to 18-Oct-2010 (Monthly) High: 55.71 Low: 1.94 Latest: 38.86

Price (USD)

Questions…

Value Investing October 22 nd, 2010 Presented by Jason J. Tyler.

Documents

Transcript of Value Investing October 22 nd, 2010 Presented by Jason J. Tyler.