Ariel Investments co-CEO John Rogers expects overlooked consumer stocks to shine once the artificial intelligence trade falters. He says many consumer brands trade under 10 times next year’s earnings, and he names J.M. Smucker among four picks.
The S&P 500 closed above 7,800 for the first time on Tuesday, powered by semiconductor shares. However, Rogers, whose firm focuses on value investing, sees the same setup that preceded the 2000 internet bubble collapse.
Can Overlooked Stocks Repeat the Post-2000 Rebound?
Investors have piled into AI-linked tech since late 2022. AI earnings optimism lifted the Dow and S&P 500 to records on Aug. 4. Many non-tech companies, however, lagged. That being said, Roger’s one pick, J.M. Smucker Company, is currently on pace with AI supergiant, Nvidia.
The Smucker Company is up nearly 26% in the last 6 months with Nvidia up 28%.
Historically, smaller, less glamorous companies outpaced the market for years after 2000, Rogers said on CNBC‘s “Squawk Box” on Wednesday.
Meanwhile, the Ariel chief investment officer says he has not seen discounts this deep in 20 to 30 years. He explained the gap this way.
“They’re selling at bargains because they are not the sexy things to own.”
John Rogers, co-CEO and chief investment officer of Ariel Investments, via CNBC
Why Does Rogers Think AI Cannot Disrupt These Four?
OneSpaWorld, which operates spas aboard cruise ships, has gained about 11% this year. FactSet, a financial data provider, shows analysts’ average price target implies 36% upside.
Madison Square Garden Entertainment, which runs venues including Radio City Music Hall, is up roughly 49%.
Sphere Entertainment, which operates a Las Vegas entertainment arena, is up more than 8%. Rogers says AI will not disrupt either, because people want entertainment.
J.M. Smucker, the company behind Folgers coffee and Jif peanut butter, has risen 25% in the last six months. Meanwhile, analysts’ average target implies another 21% over the next year. Rogers says shoppers will buy its products whether or not AI is around.
Rogers concedes nobody knows when the inflection point will arrive. In contrast, technology accounts for roughly one-third of the S&P 500. The index’s top 10 companies hold near 40%, as BeInCrypto noted during the AI bubble debate.
