John W. Rogers, the manager of Ariel Investments is one of the most notorious stock pickers in the investment world. He launched his fund after working for over two years as a stockbroker at William Blair & Company, LLC. Currently, Ariel Investments has around $9 billion in assets under management and returned over 22% over the past year. In a recent interview on CNBC, Mr. Rogers has discussed three stocks he is bullish on: KKR & Co. L.P. (NYSE:KKR), First American Financial Corp (NYSE:FAF) and Dun & Bradstreet Corp (NYSE:DNB).
KKR & Co. L.P. (NYSE:KKR) currently represents the largest holding in Ariel’s portfolio, Mr. Rogers stated, also pointing out that they consider the stock being “extraordinarily cheap.” However, in its latest 13F filing, Ariel Investment revealed holding over 6.5 million shares, with an aggregate value of $149.5 million, the position being only the 14th largest in terms of value.
“People are underestimating the power they [KKR] have to gather assets and grow their assets over the next 3-5 years. Great management team, strong balance sheet, it’s a wonderful franchise,” the CEO of Ariel Investment said.
Mr. Rogers also stated that KKR & Co. L.P. (NYSE:KKR)’s recent acquisition of KKR Financial Holdings (KFN) was a good move and Ariel Investments, as a large shareholder of KKR, has spent time discussing with the management of KKR about this merger. Mr. Rogers considers that this merger (that took place at the end of April) will strenghten KKR & Co. L.P. (NYSE:KKR)’s balance sheet in the long-term run and the market has not “understood the power of the merger.”
Another hedge fund betting on KKR & Co. L.P. (NYSE:KKR) is GMT Capital, run by Thomas E. Claugus, which held 4.95 million shares of the company in its equity portfolio at the end of March. Robert Joseph Caruso‘s Select Equity Group has more than doubled its holding to 4.76 million shares during the first three months of the year.
Another pick of Mr. Rogers, First American Financial Corp (NYSE:FAF), is one of the largest title insurance companies in the U.S. and in his view, the company will gain on the U.S. housing recovery, and is well-positioned to benefit from the 1.5 million new homes in the country. At the same time, with the interest rates staying low, and mortgage rates declining, people will need to refinance their mortgages and for that they will need title insurance.
“With the stock at 13 times earnings it’s a real bargain, it does not reflect this current environment for the housing recovery,” John Rogers said.
In the latest 13F filing, First American Financial Corp (NYSE:FAF) was the second-largest holding in terms of value in Ariel Investment’s equity portfolio, the fund reporting ownership of over 9.60 million shares, valued at $254.96 million, the position amassing over 3% of the total equity portfolio. Another shareholder bullish on the stock is Ralph V. Whitworth‘s Relational Investors, which initiated a stake in the company during the first quarter, holding some 2.67 million shares of First American Financial Corp (NYSE:FAF) as of the end of March.
In Dun & Bradstreet Corp (NYSE:DNB), Ariel Investments disclosed a $87.12 million stake, which contained some 876,900 shares as of the end of March. About this company, the CEO of the fund said that it is a “perennial, wonderful brand.” Dun & Bradstreet Corp (NYSE:DNB) is engaged in providing commercial information and insight on business, helping its customers to make investment decisions based on several factors such as the credit risk of a business.
“Credit information is more important than ever, we’ve learned that during the financial crisis. You need to understand who is financially strong and companies like DNB are very well positioned to benefit from that,” Mr. Rogers also said.
Cliff Asness‘ Aqr Capital Management is another shareholder of Dun & Bradstreet Corp (NYSE:DNB), doubling its stake during the first quarter to around 431,800 shares. Ken Griffin‘s Citadel Investment Group and Robert Pohly‘s Samlyn Capital have initiated stakes in Dun & Bradstreet Corp (NYSE:DNB) during the first three months, currently holding approximately 310,300 shares and 352,200 shares respectively.
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