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When John W. Rogers launched Ariel Investments in 1983, the sole major account he had was Howard University’s endowment fund, $100,000 worth. In only three years, the assets under Ariel’s management grew to $45 million. Now, the fund manages approximately $4 billion in assets. Because of Rogers’ achievement, in 2008, he was awarded the Woodrow Wilson Award, the highest honor of Princeton University presented each year to the alumni whose career embodies a commitment to national service. Rogers is an interesting man. When he studied economics at Princeton, he served as captain of the 1979-80 Ivy League co-champion Princeton Tigers men’s basketball team. Before starting Ariel Investments, he spent two and a half years at William Blair & Company as a stockbroker.

Top 20 positions in Ariel’s portfolio as of September 30, 2011.

Company Name

Ticker

Value

Activity

JONES LANG LASALLE INC

JLL

127682.019

18%

GANNETT INC

GCI

122911.777

-1%

LAZARD LTD

LAZ

121507.733

21%

JANUS CAP GROUP INC

JNS

118049.74

19%

INTERPUBLIC GROUP COS INC

IPG

117889.62

18%

MOHAWK INDUSTRIES INC

MHK

111390.88

-11%

ZIMMER HOLDINGS INC

ZMH

110005.451

-24%

INTERNATIONAL GAME TECH

IGT

96356.342

-20%

DEVRY INC DEL

DV

93815.958

-12%

FIRST AMERICAN FINL

FAF

92379.76

-1%

BIO RAD LABORATORIES INC

BIO

89918.7

-20%

SMUCKER J M CO

SJM

89383.097

-29%

HOSPIRA INC

HSP

88132.388

45%

C B RICHARD ELLIS

CBG

87429.796

17%

NORDSTROM INC

JWN

76561.13

-34%

FAIR ISAAC CORP

FICO

76178.865

-5%

BRADY CORP

BRC

70934.237

-9%

DELL INC

DELL

68034

8%

INTERFACE INC

IFSIA

67646.833

-6%

STANLEY BLACK & DECKER

SWK

66311.583

-21%

Ariel’s portfolio value was reduced from $5.4 billion at the end of June to $3.8 billion at the end of September. But the number of positions was slightly higher. Ariel had had 117 different positions at the end of the second quarter, and now it has 120 different positions in its portfolio. Rogers sold out two positions over the third quarter: Clorox Co (CLX) and Guaranty Bancorp (GBNK). The fund used to have $16.6 million invested in CLX and $630,000 invested in GBNK at the end of June. But in its latest 13F, Ariel did not report to own any shares of these two stocks. CLX lost 2.62% and GBNK returned 16.67% since the end of September, during which SPY was up 5.80%. If Ariel had not sold out these two positions, the fund would have lost approximately 1.91% from the positions since the end of the third quarter.

The largest position in Ariel’s portfolio at the end of September was Jones Lang Lasalle Inc (JLL). The fund had $128 million invested in this stock and increased the position by 18% over the third quarter. JLL returned 14.3% since the end of the third quarter. Chuck Royce and Ken Heebner are among the other star investors who are bullish about JLL. Ariel also increased its stakes in Lazard Ltd (LAZ) by 21% to $122 million, and LAZ gained 13.54% so far since September 30, beating the market by 7.74%. Ariel was also bullish about Gannett Inc (GCI), Janus Cap Group Inc (JNS), and Interpublic Group Cos Inc (IPG). Together with JLL and LAZ, these five stocks were the top five positions of the fund as of September 30. GCI returned 10.39%, JNS returned 2.52% and IPG gained 22.08% since then. The top five positions had a weighted average return of 12.6%, beating the market by almost 7 percentage points.

In the third quarter, Ariel bought new stakes in KKR & Co (KKR). According to the latest 13F of the fund, Ariel initiated a brand new $40 million of KKR during the third quarter. KKR gained 15.97% so far since the end of September, outperforming the market by more than 10 percentage points. Ariel also opened new positions in Charles River Laboratories International Inc (CRL), Blackstone Group Lp (BX), Cowen Group Inc (COWN), and Warren Buffett's Berkshire Hathaway Inc (BRK.B).

Ariel is doing quite well in the fourth quarter. Four out of the five largest positions in Ariel’s portfolio outperformed the market, and these five positions outperformed the market by nearly 7% on a weighted average basis. We encourage investors to focus on the best stock picks of Ariel Investments, and we believe that by doing so, investors will be able to beat the market in the long term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Top Stock Picks From John Rogers