value investing october 22 nd, 2010 presented by jason j. tyler
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TRANSCRIPT
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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• Investment Styles
• How does Ariel Practice Value Investing?
• Investment Management
• Lab School Value Investing
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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
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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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• Investment Styles
• How does Ariel Practice Value Investing?
• Investment Management
• Lab School Value Investing
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What it takes to be an analyst
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• Investment Styles
• How does Ariel Practice Value Investing?
• Investment Management
• Lab School Value Investing
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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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©FactSet Research SystemsData Source: FactSet Prices
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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©FactSet Research SystemsData Source: FactSet Prices
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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©FactSet Research SystemsData Source: FactSet Prices
Nordstrom Inc. (JWN)31-Dec-1984 to 18-Oct-2010 (Monthly) High: 55.71 Low: 1.94 Latest: 38.86
Price (USD)
Questions…