532 / 772
2
manager, so you won’t see a lot of trades in a quarter.
In the third quarter of this year, Nygren made just
one purchase, adding to the fund’s position in
General
Electric
GE
. It illustrates how Nygren’s view of
value is more like Warren Buffett’s than John Neff’s,
who ran the deep-value
Vanguard Windsor
VWNDX
.
Buffett says you pay a fair price for a great business
that has defensible moats and can compound your
investment over time.
GE
has a Morningstar Economic
Moat Rating of wide because its installed base of
industrial equipment is a huge challenge to competi-
tors. In the third quarter, the stock dipped to its
lowest point in a couple of years, illustrating that
Nygren does still care about price.
Meantime, Nygren trimmed a big winner and a big
loser. That dot to the far upper right is red-hot
Amazon.com
AMZN
, which has doubled for the year
to date as its growth continues at a remarkable
pace, enabled by its low-cost operations. It also has
a Morningstar Economic Moat Rating of wide. On
the far left, just touching the mid-/large-cap line is
Apache
APA
from the hard-hit oil sector. Nygren
sold much of his stake in the company as falling oil
prices hit the shares of this no-moat company. A
deep-value investor might buy more on a sell-off, but
Nygren may have decided that would be throwing
good money after bad.
Ariel Fund ARGFX: Sell the price risk.
John Rogers is also a fan of Buffett, but, as you can
see, he fishes in a different pond from Nygren. Ariel’s
buys were mostly on the lower-left side, while it
consistently sold stocks whose valuations moved into
growth territory. Clearly, valuation matters more at
Ariel. In fact, the fund has a huge number of holdings
in narrow-moat stocks, indicating Rogers will sacri-
fice some barriers to entry in exchange for a break on
price. Those three sales toward the upper right are
CBRE Group
CBG
,
Royal Caribbean Cruises
RCL
, and
Mohawk Industries
MHK
. Each was a slight trim
in the position size , indicating that Rogers is gradually
redeploying money from pricier to cheaper names.
Those two blue dots on the lower left are
Kennametal
KMT
and
Bristow
BRS
. Both have been hammered
this year and no doubt appear cheap to Rogers.
Bristow is an energy name--like I said, some value
managers are buying more energy.
Vanguard Windsor II VWNFX: Cast a wide net.
Lead manager Jim Barrow once said, “I hate all
the companies we own.” I love the honesty of this
deep-value manager. His idea is to buy stocks so
cheap that even modest improvement will pay off
handsomely. Yet, this picture shows buys and sells
widely dispersed across the style box. The explanation
is that Barrow isn’t the only cook on this fund. His
firm runs
60%
of the assets, while Vanguard farms
out the rest to four more subadvisors. Each one
uses a different value strategy, and the fund now
owns
260
holdings.
Every Picture Tells an Investment Story
Continued From Cover
Valuation
Value
Blend
Growth
Market Capitalization
Small
Mid
Large
1
Buys
1
Sells
Ariel Fund
ARGFX
Valuation
Value
Blend
Growth
Market Capitalization
Small
Mid
Large
1
Buys
1
Sells
Vanguard
Windsor II VWNFX