John Rogers manages Ariel Investments; a hedge fund with a portfolio valued at $8.34 billion. Rogers made several changes to his holdings in the fourth quarter, earning an average return of 7.57 percent. Over the last three years, Rogers has an annualized return of 9.07 percent.
In a 2010 interview with Forbes, Rogers commented on his investing strategy, explaining, “We try to invest like Warren Buffett. We try to buy cheap stocks and get them while out of favor. We invest in small and midsize companies. We stay with industries we know well. You need to stay within your circle of competence.”
Does this advice still hold true? Let’s take a look at some of Rogers’ hedge fund transactions from the most recent quarter such as Nokia Corporation (ADR) (NYSE:NOK), Chesapeake Energy Corporation (NYSE:CHK), and Gilead Sciences, Inc. (NASDAQ:GILD).
Gilead Sciences, Inc.
Rogers did not change his position in Gilead, a biotech company most known for its hepatitis C therapies. Gilead comprises more 1.5 percent of Ariel Investments’ portfolio with holdings valued at $132 million, making it one of the portfolio’s larger positions.
Gilead’s hep C vaccines, Harvoni and Sovaldi, make up more than half of the company’s revenue. Although it still dominates the market, many are beginning to worry new competing regimens from Merck and AbbVie will threaten Gilead’s market share as they provide a cheaper alternative. Shares of Gilead have suffered slightly from this perceived competition, falling more than 11 percent year-to-date. However, the biotech giant has been a solid long-term investment as it has soared more than 365 percent over the last 5 years.
Most analysts agree that Gilead is a good buy. According to TipRanks, 15 analysts recommend buying shares of the stock while 3 remain neutral. The average 12-month price target for the company is $118.25, marking a 32% potential upside from where shares last closed.
Nokia Corporation (ADR)
Rogers increased his position in Nokia in the fourth quarter by more than 8 percent. Ariel Investments now owns nearly 8 million shares of the telecommunications company valued at $56 million. However, this sum constitutes less than 1 percent of the entire portfolio.
One can assume that the hedge fund is bullish on Nokia’s notable acquisition of Alcatel Lucent. In April, Nokia announced it would be acquiring the French-based telecommunications company for $16.6 billion. The company expects the acquisition to result in cost saving synergies of 900 million euros on an annual basis by 2019. The company is also staying on the cutting edge of tech developments with its OZO virtual reality camera, retailing for $60K.
Most analysts seem to echo Rogers’ bullish sentiment on Nokia. According to TipRanks, 6 analysts are bullish on the company while 2 remain on the sidelines. The average 12-month price target between these 8 analysts is $9.60, marking a 64% potential upside from where shares last closed.
Chesapeake Energy Corporation
In the fourth quarter, Rogers reduced his position in the oil company by 15 percent. Now, Ariel Investments has over 200K shares of the company valued at just over $1 million.
It’s been a wild ride for oil. Prices have been plunging for more than a year and a half due to decelerating demand and oversupply. Analysts attribute this to a variety of factors, including China’s decelerating production levels, which take a toll on overall demand as China is the second largest oil consumers in the world. Experts are divided over when, and if, oil prices will stabilize especially with Iran’s entrance to the global oil economy after its sanctions were lifted.
Rogers isn’t the only one shying away from the oil giant. According to TipRanks, only 1 analyst remains bullish on the company, 2 recommend selling shares, and 6 are staying on the sidelines.