John Rogers, chairman and chief executive officer at Ariel Investments, discusses the “crisis” faced by Tesla Motors Inc., his firm’s investment strategy, and three stocks they are watching. He speaks on “Bloomberg Daybreak: Americas.” (Source: Bloomberg)
Ariel Investments CEO Rogers: A Real Crisis For Tesla
Since its inception in January 2012, the long book of the Voss Value Fund, Voss Capital's flagship offering, has substantially outperformed the market. The long/short equity fund has turned every $1 invested into an estimated $13.37. Over the same time frame, every $1 invested in the S&P 500 has become $3.66. Q1 2021 hedge fund Read More
John Rogers of Ariel Investments is right here with us in Chicago. I want to talk about three companies are watching but before we do that Tesla we have to have a word on Tesla. It's so much in the news what do you think.
I think it's a real crisis for Tesla. And in the show when we have added leverage wasn't a problem can be if something goes wrong and clearly Elon made a mistake and it seems like they're going to be under enormous pressure for quite a long time.
John how does a bottom up investor like you look at these high valuation momentum stocks that are really betting on the future and not margins of production. Now how do you look at an investment like that.
You know we're value investors we want to buy Bardens stocks and so those stocks that everyone has become convinced will only go up and they become big parts of the indexes were going to be very very cautious. And it reminds us that like the Internet bubble these companies will have a tremendous collapse. Most of them sometime over the intermediate time.
So so well that's certainly not been a high flyer recently into Viacom. That's a stock you're interested I'm curious about that because Viacom generally people are really skeptical about what its future is. Why are you interested.
Viacom Well we think that Bob Baktash just come in and has done a terrific job reordering the priorities and a couple of things we like a lot. One we love their international and global movement. They are doing enormous amount of work to get their content global. At the same time I think locally. I think the Paramount Pictures Studios are going to do a wonderful job not only with great movies like you know the last mission impossible but also they're creating product for television. And as you know there's so much demand now for content for all the different television properties out there.
But I'm curious about that because the received wisdom is particularly over the top coming you need really powerful brands and Viacom there was a time that it had Dorthe explore it had MTV had it and it lost a lot of those brands it really hasn't replaced them. Does Bob Behkish have the wherewithal to recreate brands like that.
I don't think they'll recreate new brands. I think they'll strengthen the old ones. Not only paramount but you know things like Nickelodeon can be a popular product for kids and they'll learn how to stream it effectively take more global. They have some terrific brands that can be utilized better. How about MSJ. You're just in that one as well. Tell us about the industry. We like both Mattson's regard in itself we think it's a great great company. You know owning the Knicks and the Rangers and someday the Knicks will come back and be world champions again. Oh is that right. Is that happening. I think it's in the next couple of years. I think the leadership there Steve Mills and the management team he's a great friend they're going to do a wonderful job. The Madison Square Garden Network the regional sports that is really really cheap and people have to watch those games on television and local broadcasting power and it's going to be very very important.
And John that was a story say even a year ago that ESPN was going to be just fine for example because you have to watch live sporting events and have to watch them on TV. But then we have seen ESPN describers kind of move lower and we've seen sports events go to like Twitter for example was some disruption possibility in an investment like MSJ.
We don't think there is going to be disruption for companies like Madison Square Garden networks they have the rights for them over that more than 15 years into the future to be able to broadcast the Knicks and the Rangers in New York. Those are great great brands. They have very loyal fans and people will be there wanting to watch live sports as those teams continue to build back the quality of their teams and start to win again. So we don't think you'll see disruption there but also these stocks are so cheap because of the fear you know less than 10 times earnings. Madison Square Garden Network generates enormous amounts of cash. They have advertising revenue. They're doing things to be able to get their product over the top. So we think that the fears there are way way overblown. It's a real opportunity.
So fun is hard. You mentioned before why your rational Lazard. I mean I think it was sort of a boutique investment bank but they don't have the huge financing capability of a city or Bank of America. Why do you think they're going to do well.
Well we think that more and more deals are going to happen the consolidation of American businesses and worldwide business just continues. And because they don't have the conflicts that some of the large international banks have. It's actually a benefit the Lazard is a pure investment bank giving advice and counsel for CEOs when they really need it and boards of directors. And finally they diversified so effectively. We just think it's great to be able to have the Restructuring business along with the international and global and emerging markets mutual funds and money management business. You've got a really nice three pronged platform there.
What about some of the names like a for example what I've been learning so much more as the big investment banks have gotten constricted loans that they can make. How do you view that especially in light of global leverage story.
Well we're not we we decide to stay away from the sort of traditional banks the traditional investment banks are not as interesting to us. The brokerage firms having to depend on transactions and research. We think that model is a little outdated and is not as profitable.