Another defensive investor suddenly has a hot hand.

Like other value investors, John W. Rogers Jr., manager of Ariel Fund, looked pretty dull in the late 1990s compared with the hot aggressive growth hands around the mutual fund business. Tech stocks were still going strong while Ariel, a small- and mid-cap value fund that focuses on what Rogers calls "turtle stocks," had fallen nearly 6%.

Turtle stocks, explains Rogers, are "good, defensive stocks that make sense. They are issued by businesses whose brands command a high market share, and that operate in stable industries with high barriers to entry." And, like the unflappable amphibian in Aesop's fable, he believes, they eventually win the race.

Since 2000, the tortoise has not only beat the hare, but bought it. Ariel Fund's 12.4% annualized return over the past three years surpasses that of most growth funds over the same period. In an ironic twist, Janus Capital Group stock had gotten so beaten down by March of this year that the 45-year-old Rogers decided it was time to add it to Ariel's portfolio. He applauds the firm's efforts to expand its product line beyond its traditional focus on large-cap growth, and believed a rebound in growth stocks would have a powerful impact on revenues. That rebound happened quickly, and pushed Janus stock up sharply in the months following the purchase.

Since 1983, the year he founded Chicago's Ariel Capital Management, Rogers has focused on out-of-favor stocks whose virtues, such as a strong franchise, good cash flow or consistent earnings growth, eventually come to the forefront. On the valuation side, he looks for stocks with below-market price-to-earnings ratios-he prefers that they sell for no more than 13 times next year's earnings when he buys them-and that trade at least 40% below their private market, or intrinsic, value. Once a stock reaches his estimate of intrinsic value, he sells it.

Although his picks can move ahead quickly, as Janus did, he is often willing to hang on to them for several years. The fund's annual portfolio turnover rate last year was a mere 5%. The low turnover ratio is one reason Rogers believes Ariel's $1.5 billion asset base, which has grown five-fold over the last three years, does not adversely affect its investment strategy. "When you're talking about a fund that invests in micro-caps and has a 200% annual turnover, fund size is important," he says. "It's not an issue with use because we concentrate on the large end of the small company universe, and don't trade very frequently."

In his company's literature and web site, Rogers drives home the virtues of holding on through thick and thin, and of patient investing. His company's logo is a turtle. His web site features an illustrated version of Aesop's fable. The company's motto: "Slow and steady wins the race."

He also relates sports to investing, a throwback to his days as captain of the basketball team at Princeton University, where he graduated in 1980. In a recent portfolio manager commentary, he notes that his former coach, the legendary Pete Carril, "has been known to say that when players get tired, their weaknesses get exposed. The same could be said of publicly traded companies in a three-year-old bear market. Specifically, as tough economies and cruel markets test the mettle of corporate America, their underbellies are revealed." Later, he writes about how "we have identified the Michael Jordans of our small- and mid-cap universe and benched those holdings appearing to be low on stamina."

Investors who aren't crazy about turtles, basketball or colorful analogies might find reason to like Ariel Fund anyway. Over the last ten years, its annual return has averaged more than 13%, placing it in the top quarter of its Morningstar group. Despite its concentrated portfolio, which holds 41 stocks and has 38% of assets in the top ten names, a strict value discipline helps keep volatility low. Its beta of 0.46 compared with the Russell 2000 Index, a measure of smaller company performance, testifies to Rogers' contrarian investment style and the appeal of the fund as a diversification tool.

"This is one of our favorite [funds] in the small-value category," notes Morningstar analyst William Harding. "Rogers' distinguished record over his long career and disciplined approach inspires confidence that his picks will reap rewards over time."

The fund also has a little something to offer the socially conscious contingent. Rogers won't invest in companies whose primary source of revenue is derived from tobacco products, the generation of nuclear energy or the manufacture of handguns. Given the fund's small- and mid-cap focus, those filters are probably more symbolic than restrictive anyway. Ariel analysts also like to see a commitment to diversity, although the firm has no hard and fast rules about the number of minority members a company must have in management or on the board of directors.

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