Navigating the New Cycle: How John Rogers is Positioning Ariel Appreciation Fund for Sector Tailwinds and Value Opportunities

In an era of economic uncertainty and shifting sector dynamics, John Rogers—lead manager of the Ariel Appreciation Fund—has executed a bold set of portfolio shifts in Q1 2025. His moves reflect a disciplined “sell peaks, buy valleys” strategy, reallocating capital from post-pandemic winners to secular growth themes such as infrastructure resilience and advertising consolidation. Let's dissect the rationale behind his adjustments and what they signal for investors.

Buying the Dip: Generac (GNRC) – A Play on Infrastructure Resilience

Rogers significantly increased his stake in Generac (GNRC), boosting its portfolio weight to 3.36% with a 36.7% position increase—the largest move in the fund's top holdings. Despite GNRC trading 55% below its 2021 peak, Rogers sees a compelling opportunity in its backup power systems.

Why now?
- Tailwinds: Data center expansion, electrification trends, and extreme weather are driving long-term demand for backup power.
- Valuation: The stock's dip has created a margin-of-safety entry point, with Rogers betting on cyclical recovery.

Averaging Down in Advertising: Interpublic Group (IPG)

The fund increased its IPG position by 7.6%, now accounting for 3.47% of holdings. This comes amid an “ad spending mini-recession,” with IPG guiding for -1% to -2% organic growth in FY2025.

The contrarian play:
- Merger synergies: Rogers is eyeing a potential $750 million upside from IPG's planned 2025 merger with Omnicom.
- Valuation: IPG trades at ~11x forward EPS—a discount to its historical average—suggesting a recovery path.

Trimming the Winners: Mattel (MAT) – Managing Overvaluation Risks

The Ariel Fund reduced its Mattel position by 13.8%, marking profit-taking after a 70% surge fueled by the Barbie movie.

Rationale:
- Demand normalization: Q1 sales grew just 2%, signaling a slowdown from pandemic-era highs.
- Risks: Tariffs on Chinese-made toys and a weakening consumer backdrop justify trimming exposure.

Rebalancing in Financials: Northern Trust (NTRS)

The fund has cut its NTRS stake by 7.3% for the third straight quarter. While Northern Trust delivered 13% EPS growth, its margins lag peers, prompting Rogers to reduce exposure.

Key takeaways:
- Wealth management thesis intact: The trim is a rebalancing move, not a full exit, reflecting discipline in profit-taking.
- Sector caution: Rogers is trimming financials to adjust for a “relief rally” in bank stocks post-2023 turmoil.

The Overall Strategy: Risk Management Meets Contrarian Value

Rogers' Q1 moves reveal a clear playbook:
1. Sell peaks: Trim positions in overvalued winners (MAT, NTRS) to lock in gains and reduce risk.
2. Buy valleys: Reallocate to beaten-down cyclicals (GNRC, IPG) with structural tailwinds.
3. Sector pivot: Shift capital from pandemic-era beneficiaries to industries poised for long-term growth, such as infrastructure and advertising consolidation.

The fund redeployed cash from trims into GNRC, nearly offsetting the total $28 million freed by reductions in MAT, NTRS, and FAF. This underscores a focus on quality names with misunderstood valuations, a core Ariel philosophy.

Investment Implications and Risks

Why investors should take note:
- Cyclical recovery bets: Rogers is positioning for a rebound in sectors facing near-term headwinds but strong long-term demand (e.g., backup power, ad consolidation).
- Disciplined rebalancing: Trimming winners to fund undervalued opportunities reduces portfolio drag and aligns with a “buy low, sell high” ethos.

Risks to consider:
- Sector concentration: Overweighting in mid-cap cyclicals could amplify volatility during economic downturns.
- Execution risks: IPG's merger timeline and GNRC's sales growth depend on factors like regulatory approval and weather patterns.

Conclusion: Follow the Contrarian Playbook

John Rogers' Q1 shifts offer a masterclass in navigating uncertainty. By trimming overvalued winners and betting on undervalued sectors with secular tailwinds, he's balancing risk and reward in a volatile market. Investors seeking to emulate this strategy should:
1. Monitor cyclical sectors: Look for dips in industries like industrials (GNRC) and advertising (IPG) that align with long-term trends.
2. Avoid overexposure: Use rebalancing to prevent portfolio drag from overvalued names.
3. Stay patient: Rogers' “wait for the margin of safety” approach requires time to pay off, but history suggests it works.

In a world where “peak everything” risks dominate, Rogers' contrarian reallocates offer a roadmap for turning volatility into opportunity.

Data as of June 19, 2025. Past performance does not guarantee future results.