Despite the stock market’s recent volatility, now is a good time to invest, says John Rogers, chief investment officer for money-management stalwart Ariel Investments.
“There is so much negativity out there, with talk of a recession,” he said at the Gabelli Funds Value Investing Conference Friday. “When everyone is so fearful, that gives investment opportunities. the next three to five years will be fine. We’ll get through this crisis.”
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Rogers offered a spirited defense of securities-brokerage titan Charles Schwab, (SCHW). Its stock has dropped 35% since March 8, because its operations include a bank. And, of course, the banking industry is in crisis.
“The Schwab brand is so extraordinary. I know their leadership, and they’re a world class organization,” Rogers said. “The bank inside it is still gaining deposits. They’re getting thrown out with the bathwater.”
Investors got scared after Silicon Valley Bank collapsed, he noted. “But we don’t see a long-term impact for Schwab.”
Rogers Goes for Housing Stocks
Rogers is enthusiastic about the housing industry. “Higher interest rates have hurt the housing sector,” he said. Investing directly in housing, such as homebuilders, is too risky now, he said, presumably because of high rates and a slowing economy.
But “suppliers” to the housing industry represent a good bet. He cited:
- Masco (MAS), a home improvement and building products company;
- Resideo Technologies (REZI), which makes temperature control products;
- ADT (ADT), the home and business security company; and
- First American Financial (FAFL) , a home insurance company.
As for ADT, “more people want to be safe at home,” Rogers said. It has a powerful brand and lucrative partnerships with State Farm Insurance. Furthermore, the stock is down more than 50% since June 2021.
“Now interest rates are stabilizing, and we think housing can come back. There’s pent-up demand, and it can benefit from refurbishment,” Rogers said. “The stocks are very cheap.”
Investing in Sports Franchises
Rogers also likes sports franchises. “Things are getting better and better” for them, he said. “The money flowing in from TV is extraordinary, and gaming money is coming in too.”
The NBA playoffs are generating great energy, he said. “The upside [for sports teams] is phenomenal.”
Rogers is bullish on Madison Square Garden Sports (MSGS), which owns the New York Knickerbockers and Rangers. He also favors Madison Square Garden Entertainment (MSGE), which owns Madison Square Garden, where the Knicks and Rangers play.
MSG Sports is selling at a 50% discount, and Madison Square Garden is a “one-of-a-kind arena,” Rogers said.
He also had words of praise for entertainment giant Paramount Global (PARA). Its stock plunged 28% Thursday, after the company reported a big first-quarter loss and slashed its dividend almost 80%.
“It has many assets that can be monetized, including [book publisher] Simon and Schuster and BET [Black Entertainment Television network],” Rogers said. “Paramount has a lot of good content and is very well positioned.”
Finally, Rogers thinks this is a good time for investing in small-cap stocks versus large-cap. “Smaller stocks have been neglected,” he said. “They’re selling cheap. I think there will be a lot of undiscovered gems over the next few years.”
The author of this story owns shares of Madison Square Garden Entertainment.
