Investor Summary
Fund Strategy
FUND PERFORMANCE AS OF 31st December 2025
| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9.6% | 3.0% | 11.5% |
| 2025 | 2024 |
|---|---|
| 11.5% | 9.0% |
| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9.6% | 3.0% | 11.5% |
| 2025 | 2024 |
|---|---|
| 11.5% | 9.0% |
Ariel Small Cap Value delivered a modest gain in Q4 2025, advancing 3.03% net of fees, slightly behind the Russell 2000 Value Index but ahead of the broader Russell 2000. The portfolio benefited from strong performance in live entertainment company Sphere Entertainment, which saw robust consumer demand for The Wizard of Oz, and boutique asset manager Affiliated Managers Group, which continues building momentum in tax-aware investment solutions. The fund added positions in specialty insurance company RLI Corp and financial data provider FactSet Research Systems, while reinitiated a position in Zebra Technologies. Headwinds included weakness in Resideo Technologies due to HVAC channel disruption and Generac Holdings facing softer residential demand. Looking ahead to 2026, the managers maintain a measured and cautious view on U.S. equities, citing elevated market volatility and concentration in large-cap stocks. They remain disciplined in their long-term approach, focusing on bottom-up fundamentals rather than macro assumptions, with confidence in their portfolio positioning given emphasis on robust balance sheets, durable fundamentals, and strong management teams.
Ariel Small Cap Value maintains a disciplined, long-term approach focused on robust balance sheets, durable fundamentals, valuation discipline, capable management teams and strong brands to capture attractive upside as market leadership evolves and opportunities broaden.
We enter 2026 with a measured and cautious view on U.S. equities. While moderating inflation and generally resilient corporate fundamentals offer areas of support, markets continue to experience elevated volatility and index performance remains heavily concentrated in a small number of large-cap stocks. We remain disciplined and long-term in our approach, grounding our decisions in bottom-up fundamentals rather than macro assumptions. On balance, we believe our portfolios are well-positioned to navigate this environment.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 18 2026 | 2025 Q4 | AMG, FDS, GNRC, KMT, NCLH, PSKY, REZI, RLI, SPHR, ZBRA | AI, Entertainment, insurance, Manufacturing, small cap, technology, value |
SPHR AMG KMT REZI GNRC NCLH FDS RLI ZBRA |
Artificial intelligence continues to drive structural trends and productivity gains across industries, though benefits are unevenly distributed. The technology is contributing to market concentration and… |
| Oct 15 2025 | 2025 Q3 | BCO, KMT, MAT, PBH, REZI, SPHR, ZBRA | consumer, cyclicals, industrials, small caps, valuation |
REZI US BCO US SPHR US KMT US |
Ariel sees improving prospects for small caps and cyclical stocks amid Fed easing, strong earnings, and valuation gaps versus large caps. The strategy favors pro-cyclical… |
| Jul 17 2025 | 2025 Q2 | CLB, DNB, FAF, LIND, OSW, REZI, WEX, ZBRA | Discounts, earnings recovery, Mean reversion, small caps, value |
CLB FAF ZBRA |
The letter argues that small-cap value stocks are trading at historic discounts versus large caps. Management highlights improving earnings, balance sheet repair, and long-term growth… |
| Mar 31 2025 | 2025 Q1 | ADT, BIO, FAF, LESL, LIND, MIDD, NCLH | - | - | - |
| Dec 31 2024 | 2024 Q4 | BCO, LIND, MGPI, MHK, NCLH, OSW | - | - | - |
| Sep 30 2024 | 2024 Q3 | BRC, CLB, JLL, LAZ, LESL, LIND, MHK, WEX | - | - | - |
| Jul 31 2024 | 2024 Q2 | BCO, CLB, HMN, LESL, MIDD, OSW, PARA, SPHR | - | - | - |
| Apr 15 2024 | 2024 Q1 | CG, DNB, LAZ, LIND, MGPI, NVT, OSW, SPHR | - | - | - |
| Feb 20 2024 | 2023 Q4 | CLB, JHG, JLL, LIND, MAT, NVST, OSW | - | - | - |
| Sep 30 2023 | 2023 Q3 | AMG, BCO, LESL, LIND, MAT, NCLH, SPHR | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
CruisesCruise industry faces renewed skepticism despite record bookings and robust customer deposits. Norwegian Cruise Line maintains confidence in long-term demand supported by strategic capacity expansion and private island enhancements. |
Cruises Travel Bookings Capacity Tourism | |
Data CentersSupply constraints curtailing infrastructure buildout rate, but compute capacity is being used immediately upon coming online. This differs from dot-com bubble when dark fiber was installed ahead of need. Labor, power and land shortages creating bottlenecks. |
Supply Constraints Utilization Bottlenecks Infrastructure | |
EntertainmentLive entertainment companies like Sphere Entertainment and Madison Square Garden Entertainment showed strong performance driven by robust consumer demand for concerts and live shows. The success of The Wizard of Oz at Sphere demonstrates the venue's potential for scalable franchise opportunities both domestically and internationally. |
Live Sports Entertainment Media Event Ticketing Venues | |
| 2025 Q3 |
Cyclicals |
|
Small CapsSmall caps getting strong start in 2026 supported by easing monetary conditions and constructive fiscal backdrop. Small caps more sensitive to economic cyclicality which is overdue for expansion. Expected to grow at better pace than large caps in 2026 after long period of underperformance. |
Value Growth Cyclical Monetary Policy Fiscal Policy | |
| 2025 Q2 |
SmallCap |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 18, 2026 | Fund Letters | John Rogers | REZI | Resideo Technologies Inc. | Industrials | Building Products | Bull | New York Stock Exchange | Distribution, HVAC, Margins, recovery, spin-off | Login |
| Jan 18, 2026 | Fund Letters | John Rogers | GNRC | Generac Holdings Inc. | Industrials | Electrical Components & Equipment | Bull | New York Stock Exchange | cashflow, datacenters, Powergeneration, Resiliency, Secular | Login |
| Jan 18, 2026 | Fund Letters | John Rogers | NCLH | Norwegian Cruise Line Holdings Ltd. | Consumer Discretionary | Hotels Restaurants & Leisure | Bull | New York Stock Exchange | Bookings, Cruises, leverage, recovery, Travel | Login |
| Jan 18, 2026 | Fund Letters | John Rogers | FDS | FactSet Research Systems Inc. | Information Technology | Data Processing & Outsourced Services | Bull | New York Stock Exchange | AI, analytics, Financialdata, Margins, Switchingcosts | Login |
| Jan 18, 2026 | Fund Letters | John Rogers | RLI | RLI Corp. | Financials | Insurance | Bull | New York Stock Exchange | Cycles, Discipline, Insurance, profitability, underwriting | Login |
| Jan 18, 2026 | Fund Letters | John Rogers | ZBRA | Zebra Technologies Corp. | Information Technology | Electronic Equipment Instruments & Components | Bull | NASDAQ | Automation, efficiency, innovation, Logistics, Moat | Login |
| Oct 15, 2025 | Fund Letters | John Rogers | REZI US | Resideo Technologies, Inc. | Industrials | Building Products | Bull | NYSE | buybacks, growth, Housing, innovation, IoT, Margins, Smart home, valuation | Login |
| Oct 15, 2025 | Fund Letters | John Rogers | BCO US | Brink’s Company | Industrials | Security & Protection Services | Bull | NYSE | buybacks, FCF, growth, Logistics, Margins, Security, technology, valuation | Login |
| Oct 15, 2025 | Fund Letters | John Rogers | SPHR US | Sphere Entertainment Co. | Communication Services | Movies & Entertainment | Bull | NYSE | entertainment, expansion, Experiential, growth, Margins, media, valuation, Venues | Login |
| Oct 15, 2025 | Fund Letters | John Rogers | KMT US | Kennametal, Inc. | Consumer Discretionary | Machinery | Bull | NYSE | dividends, growth, Industrials, machinery, manufacturing, Reshoring, valuation | Login |
| Jul 17, 2025 | Fund Letters | John Rogers | CLB | Core Laboratories Inc. | Energy | Oil & Gas Equipment & Services | Bull | NYSE | Cyclicals, deleveraging, diagnostics, energy, Offshore, ROIC, services, tariffs | Login |
| Jul 17, 2025 | Fund Letters | John Rogers | FAF | First American Financial Corporation | Financials | Title Insurance | Bull | NYSE | dividends, Housing, Insurance, leverage, Mortgages, recovery, Regulation, Spreads | Login |
| Jul 17, 2025 | Fund Letters | John Rogers | ZBRA | Zebra Technologies Corporation | Information Technology | Electronic Equipment & Instruments | Bull | NASDAQ | Automation, Barcodes, buybacks, Logistics, Margins, robotics, visibility, Warehouses | Login |
| Jan 18, 2026 | Fund Letters | John Rogers | SPHR | Sphere Entertainment Co. | Communication Services | Movies & Entertainment | Bull | New York Stock Exchange | Experiential, growth, Liveentertainment, Scalability, Utilization | Login |
| Jan 18, 2026 | Fund Letters | John Rogers | AMG | Affiliated Managers Group Inc. | Financials | Asset Management & Custody Banks | Bull | New York Stock Exchange | Alternatives, Assetmanagement, Capitalallocation, Inflows, Wealth | Login |
| Jan 18, 2026 | Fund Letters | John Rogers | KMT | Kennametal Inc. | Industrials | Industrial Machinery & Supplies & Components | Bull | New York Stock Exchange | dividends, Execution, Industrial, Margins, Pricing | Login |
| TICKER | COMMENTARY |
|---|---|
| AMG | Affiliated Managers Group contributed positively with 7.13% ending weight and 1.27% contribution. |
| FDS | By looking at their Rnancials, FactSet, PayPal, Adobe, and Salesforce seem to be doing Rne. The market, however, is reading subdued revenue growth as a sign of increased competition on their core oSerings. These companies' outlooks look more di'cult than their past. |
| GNRC | Generac Holdings, Inc. (GNRC) was a bottom performer in the SMID Cap strategy in the fourth quarter. Generac's most profitable product group is Home Standby (HSB) generators, and in 2025, the U.S. experienced the fewest power outages (related to weather or other grid failures) since 2015. The lower demand for HSB will also create slightly lower margins for the year. The Commercial and Industrial segment is doing well with sales increasing 9% over last year. |
| KMT | Leading contributors included holdings in the industrials sector, led by machinery companies Kennametal |
| NCLH | Lastly, Norwegian Cruise Line Holdings Ltd. (NCLH) shares fell as the cruise industry faces renewed skepticism following peer earnings, slowing yield growth and cautious guidance. While near-term cost pressures and market volatility persist, NCLH continues to show strength with record bookings, robust customer deposits, and a solid forward-booked position. Meanwhile, management remains confident in long-term demand, supported by strategic capacity expansion and enhancements to its private island, Great Stirrup Cay, which should boost Caribbean performance. With healthy liquidity and a clear path to further balance sheet improvement, we believe NCLH is positioned for sustained profitability. |
| PSKY | By comparison, we exited Paramount Skydance Corp (PSKY) on strong price appreciation, prompting us to realize gains once the stock reached our estimate of its private market value. |
| REZI | Home comfort and security system company Resideo gave back some of its prior-quarter gains after lowering its full-year outlook due to temporary ERP implementation issues in its ADI distribution business and softer thermostat demand from HVAC channel destocking. |
| RLI | We bought specialty insurance company, RLI Corp. (RLI) during the quarter. We believe RLI is differentiated by their expertise in niche areas of the market and their disciplined underwriting focus. They are one of the best underwriters in the U.S., having generated direct underwriting profits for 29 consecutive years across different economic environments. Currently, earned premiums for their Property segment are falling as RLI walks away from unprofitable business in a softening market. Combined ratios in their Casualty business have also increased due to inflationary pressures. While these factors are near-term headwinds, we believe RLI's disciplined underwriting approach positions the company to successfully navigate this cycle and sustain healthy earnings growth over the long term. |
| SPHR | Live entertainment, media and technology company, Sphere Entertainment Co. (SPHR) was the top contributor over the period, supported by strengthening business fundamentals due to robust consumer demand for The Wizard of Oz. Financial results continue to ramp as Sphere scales its concert residencies, attracts greater interest in immersive original films and drives higher utilization across show types. We believe the success of The Wizard of Oz will help accelerate discussions with partners for future Spheres, both in the U.S. and internationally. In our view, Sphere's Las Vegas venue and its scalable franchise potential represent a compelling long-term opportunity for growth. |
| ZBRA | back in November, Zebra Technologies (ZBRA) hit our insider radar. On the surface, the valuation of the $12.6B business appeared attractive at less than a 14x P/E, a modest debt burden and decent return on incremental invested capital. It looked like a worthwhile investment candidate – but the wheels came flying off when we did our risk review. What these attractive statistics do not tell you is that management had entered into a transformative acquisition of commercial touch screen provider, Elo Touch for $1.3B. The problem, management almost certainly paid too much for a business generating ~$80M in EBITDA (earnings before interest, taxes and depreciation) (press release). At over 16x EBITDA, the acquisition blew out the capital structure with debt and presented significant execution risk resulting in an expected risk-adjusted return well below our threshold of safety. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| No industry data available | |||