According to Ariel Investments' founder John W. Rogers Jr. The time has come for US stocks to adjust, because the gains driven by the “Big Seven” have clearly gone too far. Rogers has accurately predicted that the US will avoid a recession and a rise in the market in 2023.
In an interview with Bloomberg, Rogers said that compared to history, like$NVIDIA (NVDA.US)$Such large growth stocks are already overpriced, and the market's profit expectations are too high. Despite this, he said, he believes that the market's recent rise has reached a record high, and investor enthusiasm driven by artificial intelligence is reminiscent of the burst of the internet bubble in 2000.
Rogers said, “We haven't had any major market or economic pullbacks in a long time. We seem vulnerable to major adjustments.” He added that he is more concerned about the market than about the economy.
Although the “Big Seven” promoted in 2023$S&P 500 Index (.SPX.US)$For most of the gains, Rogers notes, small company stocks began to rise in the fourth quarter.
According to this 40-year industry veteran, investors should want to buy shares in small and mid-sized companies. He said that similar to the time when the internet bubble burst, small-scale and value investments provided an opportunity.
Ariel Investments' asset management scale has grown to nearly $15 billion over the past four decades, focusing on small and medium-sized companies. The company is committed to “active patience” and takes a long-term view of its investments. Some of the company's preferred stocks include$Mohawk Industries (MHK.US)$und$Royal Caribbean (RCL.US)$.
Ariel's executive vice president and portfolio manager Ken Kuhrt pointed to the “strange duality” of consumers withdrawing from higher-price discretionary projects involving debt, but continuing to spend on experiences. The company said it is optimistic about the future of cruise lines offering packages that are more expensive this year than in 2019.
“Consumers are cautious because they have constant things to worry about,” Kuhrt said. “But when you look at it fundamentally, the factors that drive the economy, it continues to perform well.”
The Chicago-based company's Ariel Fund performed slightly worse in 2023 compared to the Russell 2500 Index and the S&P 500 Index, but it is generally in line with the Russell 2500 Value Index. According to data compiled by Bloomberg, the fund's return last year was around 16%, while the S&P 500 returned 24% in 2023.
Despite this, the company remains confident about the long-term outlook. Rogers said Ariel has outperformed the S&P 500 Index and the Russell 2500 Benchmark Index since its inception, over a time span of up to ten years, which highlights its long-term investment philosophy.
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