Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Russel Kinnel | 03-25-2015 11:00 AM

Bhansali: Opportunities in Energy and Tech

Ariel's Rupal Bhansali highlights picks, including Nokia, chipmaker Dialog Semiconductor, and energy services firms Schlumberger and Core Laboratories.

Russ Kinnel: Hi, I'm Russ Kinnel, director of manager research for Morningstar. I'm joined today by Rupal Bhansali, manager of Ariel International (AINTX) and Ariel Global (AGLOX), both of which were launched about three years ago. Rupal, thanks for joining us.

Rupal Bhansali: Glad to be here.

Kinnel: Why don't we talk about where you're finding ideas in today's markets? Obviously, the markets have gone up a lot, so some people say there aren't a lot of attractive ideas. What do you think about that and where are the best ideas coming from today?

Bhansali: Well, we are fortunate because we run two flagship strategies, the Ariel Global Fund and the Ariel International Fund, which means we have a plethora of opportunities to choose from because it's a very large mandate. In the global fund, for example, we can choose from 3,000 stocks and we typically have only 75 in the portfolio. So, we can be very discerning. I don't need the entire market to be attractive, just a few stocks.

That said, I would say that we are finding more opportunity in different sectors as opposed to different geographies. Most markets around the world have gone up. So, I think geographically, it's been a challenge. But sectorally, as you can imagine, energy is now throwing up a lot of opportunities.

Also, I would say technology. I still think that intellectual property is being undervalued worldwide and you will see more and more incidents of the kinds of headlines that you see between Google (GOOGL) and Samsung (SMSGF), and Apple (AAPL) and Samsung about patents. Patents are a very valuable asset class. So, we are finding opportunity in those companies that own patents.

You'd be surprised to know that Nokia (NOK) is actually a very key holder of patents. A lot of people think of it as yesterday's story of handset manufacturing. Well, they sold the division to Microsoft (MSFT), so now really they are much more of a licensing company. Think of them as more akin to Qualcomm (QCOM) than a manufacturing company. So, that's where we are finding opportunity.

Dialog Semiconductor (DLG) is another company in Germany, which makes power management chips and battery management. As you know, we are all carrying more portable devices, whether it's wearables, smartphones, or tablets. So, any chipset that can actually improve the battery shelf life is very important to have. And it doesn't matter if it's a Google phone or an Apple phone, et cetera; we all want to have that power management.

Well, Dialog Semi is one of the unique companies in the world that has the monopoly almost on that capability, and so we own that in the German market. So, there is a whole range of opportunities worldwide; you just have to zero in on where the opportunities are that meet our risk/reward criteria. This is a company that's trading on a high-teens multiple and can grow double-digit earnings for the foreseeable future, after the stock has tripled for us in our strategies in the last three years.

So, there are genuinely good, high-quality growth companies in the world, if you have the lens to look for them. That's where our investment discipline helps us out a lot.

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article