Ariel Investments

#### I. Institutional Overview John Rogers and his firm, Ariel Investments, represent one of the most storied and disciplined approaches to value investing in the modern era. As the first African American-owned asset management firm in the United States, Ariel has built a reputation centered on the "tortoise" philosophy—the idea that "slow and steady wins the race." This philosophy is not merely a marketing slogan but a deeply embedded investment methodology that prioritizes long-term patience, fundamental rigor, and a contrarian mindset. In the fourth quarter of 2025, Ariel’s 13F filing reveals a portfolio valued at approximately **$9.26 billion**, spread across **108 holdings**. This snapshot provides a window into how a classic value shop navigates a market that has been increasingly dominated by high-growth narratives and technological disruption. The scale of the portfolio, sitting at $9.26 billion, suggests a robust institutional presence that is large enough to command significant positions in mid-cap and small-cap companies but nimble enough to avoid the liquidity constraints faced by "mega-funds." With 108 stocks, the portfolio exhibits a "concentrated diversification" strategy. While 108 names might seem high for a high-conviction manager, a closer look at the weightings reveals that the top 10 holdings account for roughly **32.3%** of the total reported value. This indicates that while Rogers maintains a broad tail of positions for risk smoothing and opportunistic observation, his "real money" is heavily concentrated in a select group of "ballast" stocks. Ariel’s psychological portrait this quarter is one of **strategic rebalancing and disciplined profit harvesting**. The firm is not chasing the latest momentum; instead, it is meticulously adjusting its exposure to the leisure and entertainment sectors—areas where it has historically shown great expertise. The reduction in high-flying names like **SPHR (Sphere Entertainment Co.)** alongside the aggressive addition to **NCLH (Norwegian Cruise Line Holdings Ltd.)** suggests a manager who is constantly weighing "price versus value." Rogers appears to be rotating capital from assets that have reached or exceeded their near-term valuation targets into those that still offer a significant margin of safety. Furthermore, the holding periods seen in the data are remarkable. With several positions like **JLL (Jones Lang LaSalle)** and **CRL (Charles River Laboratories)** held for over a decade, Ariel demonstrates a level of conviction that is rare in an era of high-frequency trading and quarterly performance pressure. This "holding age" is a critical component of the institutional identity; it signals to the market that when Ariel enters a position, they are prepared to weather multiple economic cycles. However, the Q4 2025 report also shows that even the most patient "tortoise" will move quickly to exit a position if the underlying thesis changes or if better opportunities emerge elsewhere, as evidenced by the complete exits in **APTV (Aptiv PLC)** and **IPG (The Interpublic Group of Companies, Inc.)**. In summary, John Rogers’ Ariel Investments enters 2026 with a portfolio that is lean, focused on its core competencies in consumer services and financials, and unafraid to take a contrarian stance against prevailing market sentiment. The institution’s current state can be described as **"calculated endurance"**—maintaining a firm grip on long-term winners while aggressively recycling capital into undervalued cyclical recovery plays. #### II. Sector Allocation Analysis The sector allocation of Ariel Investments in Q4 2025 provides a profound look into the macro-economic worldview of John Rogers. Unlike many of his peers who have pivoted heavily toward Technology to capture the AI boom, Rogers remains anchored in the "real economy." | Sector | Weight (%) | | :--- | :--- | | Consumer Discretionary | 20.80 | | Financials | 20.08 | | Healthcare | 14.50 | | Industrials | 12.90 | | Communication Services | 9.16 | | Technology | 8.17 | | Consumer Staples | 4.25 | | Real Estate | 3.62 | | Energy | 3.05 | | Materials | 2.00 | | Others | 1.47 | **2.1 Concentration and Macro Judgment** The most striking feature of this allocation is the heavy concentration in **Consumer Discretionary (20.80%)** and **Financials (20.08%)**. Together, these two sectors represent over **40%** of the total portfolio. This is a highly focused bet on the resilience of the American consumer and the stability of the financial system. In a macro environment where interest rate expectations are constantly shifting, a 20% weight in Financials suggests that Rogers is comfortable with the "higher-for-longer" rate environment, which typically benefits the net interest margins of banks and the investment income of asset managers like **AMG (Affiliated Managers Group)** and **LAZ (Lazard, Inc.)**. The **Consumer Discretionary** weight is equally telling. Ariel’s holdings in this sector are not focused on fast-fashion or volatile retail, but rather on "experiences" and "leisure." Positions in **MSGE (Madison Square Garden Entertainment)**, **NCLH (Norwegian Cruise Line)**, and **BYD (Boyd Gaming)** indicate a belief that discretionary spending is shifting permanently toward high-quality entertainment and travel. This is a "post-pandemic normalization" play that has matured into a long-term structural theme for the firm. **2.2 Defensive Balancing and Growth Skepticism** With **Healthcare** at **14.50%**, Ariel maintains a significant defensive buffer. However, looking at the specific holdings like **CRL (Charles River Laboratories)** and **NVST (Envista Holdings)**, it is clear that this is not a passive bet on "Big Pharma." Instead, it is a value-driven approach to healthcare services and medical technology—areas that offer steady cash flows and are less sensitive to the boom-and-bust cycles of drug discovery. The relatively low exposure to **Technology (8.17%)** is a classic Ariel hallmark. In a quarter where the Nasdaq might have been reaching new highs, Rogers remained skeptical of the valuations in the tech space. His tech holdings, such as **CHKP (Check Point Software)** and **INTC (Intel Corporation)**, are "value tech"—companies with established moats or turnaround potential rather than speculative growth stocks. This suggests a macro judgment that the "tech premium" in the market may be overextended, leading him to seek growth in more traditional sectors like **Industrials (12.90%)**. **2.3 Sector Rotation and Industry Trends** The data suggests a subtle but important shift within the **Communication Services (9.16%)** sector. While the weight remains significant, the firm is rotating out of traditional advertising and telecom—evidenced by the exits of **IPG** and **VZ (Verizon)**—and focusing more on "live" communication and entertainment assets. The movement of capital from **SPHR** (a high-tech entertainment venue) toward more traditional leisure like **NCLH** suggests a rotation from "speculative experience" to "proven leisure demand." Furthermore, the **Industrials** allocation (12.90%) points toward a "re-industrialization" or "infrastructure efficiency" theme. Holdings like **MIDD (The Middleby Corporation)** and **ZBRA (Zebra Technologies)** are essential players in food service equipment and supply chain automation. By increasing stakes in these companies, Rogers is betting on the long-term need for corporate America to increase productivity through capital investment, regardless of the immediate macro noise. **2.4 Summary of Macro Outlook** Based on this allocation, Ariel Investments appears to be positioned for a **"muddle-through" economy** characterized by persistent but manageable inflation, stable consumer demand for services over goods, and a financial sector that provides a solid yield floor. Rogers is avoiding the "valuation traps" of the mega-cap tech sector, choosing instead to find growth in the "unloved" corners of the market where the "tortoise" can slowly accumulate shares at a discount. #### III. Top 10 Holdings Deep Dive The Top 10 holdings of Ariel Investments serve as the "ballast stones" of the $9.26 billion portfolio. These positions reflect the firm's highest-conviction ideas and its willingness to hold through volatility. **Table 3.1: Top 10 Holdings Detail** | Rank | Ticker | Company Name | Market Value | Weight (%) | Qtr Change | Weight Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | 1 | MSGE | Madison Square Garden Entertainment | $370.83M | 4.01 | -11.07% | +0.27 | | 2 | AMG | Affiliated Managers Group, Inc. | $340.81M | 3.68 | -6.46% | +0.46 | | 3 | NCLH | Norwegian Cruise Line Holdings | $320.32M | 3.46 | +18.76% | +0.28 | | 4 | SPHR | Sphere Entertainment Co. | $301.26M | 3.25 | -47.14% | -0.73 | | 5 | JLL | Jones Lang LaSalle Inc. | $300.55M | 3.25 | -6.06% | +0.22 | | 6 | OSW | OneSpaWorld Holdings Ltd. | $290.59M | 3.14 | +6.23% | +0.16 | | 7 | CRL | Charles River Laboratories | $284.81M | 3.08 | -4.18% | +0.59 | | 8 | NVST | Envista Holdings Corp. | $259.88M | 2.81 | -0.28% | +0.19 | | 9 | LAZ | Lazard, Inc. | $257.21M ---