Advice on How to Capitalize From the COVID-19 Market From Leading Investor John W. Rogers, Jr.

As the nation continues to reel from the COVID-19 crisis, legions of investors remain jittery over a hyper-volatile market. In fact, The New York Times reported that Wall Street had its worst month in March with the S&P 500 plummeting 12.5% due to the deterioration of the world economy. Last week, the market entered into bear territory with the S&P realizing the worst one-day drop since 1987 before its best three-day rally in 87 years.

When it comes to crises, financial and otherwise, African Americans are hit the hardest. And according to studies over the past 20 years, African Americans tend to be among the first investors to pull out of the market during periods of earth-jolting volatility.

Despite the recent enactment of the coronavirus stimulus package and rate cuts from the Federal Reserve, investors should be prepared to buckle their seatbelts for a rollercoaster market throughout the pandemic and its aftermath. In order to guide them on their next move, Black Enterprise spoke with one of the country’s top money managers: John Rogers, founder, co-CEO and chief investment officer of Ariel Investments (No. 1 on the 2019 BE ASSET MANAGERS list with $11.6 billion in assets under management).

(Ariel Investments Chairman & co-CEO John W. Rogers. Jr.)

Here’s an excerpt of what Ariel communicated to its clients at the start of the crisis:

We will be the first to admit, 11 years after the worst financial crisis of our generation, we did not expect to be in a foxhole again. But, here we are. While it may seem like the world is falling apart, we are writing to assure you that Ariel is not. Over our 37 year history, we have lived through the Crash of 1987’s 22% single day drop; the six day market shutdown during 9/11; the out of left field intra-day Flash Crash in 2010; the 19 month long Global Financial Crisis and now this. While a worldwide pandemic may be in a category all its own, we believe everything we have experienced up to this moment has helped prepare us for this new unknown.

Rogers offered the following advice:

1. Take a long-term view of the market

Rogers fully embraces the market philosophy of Warren Buffett, who is considered the world’s greatest investor. “He reminds us that in the last century, the Dow [Jones Industrial Average] started at 66 and ended over 11,000” and that it was marked by “a pandemic in 1918, two world wars, the Great Depression, major recessions, the war in Vietnam and presidential assassination. We always find a way in a capitalist democracy to come back.”

Rogers, who has promoted his patient investment thrust since he started his firm some 37 years ago, further asserts the importance of being a long-term investor to ultimately achieve success. “It’s hard not to worry in the current environment when you have lost 30% of your assets or your 401(K) plan has been devastated. But you have to look out over the horizon. You have to think about the next three years, not the next three months.”

2. Shop for bargain stocks

“Be greedy when others are fearful.” Rogers borrowed that quote from Buffett to illustrate the point that shrewd investors can use the current market to rebuild or fortify their portfolios by purchasing quality stocks hammered by market forces and now trading less than their intrinsic value. “If you have the cash, you can take advantage of the bargains that are out there. Just make sure that if you invest in an individual stock that it has the right balance sheet strength to make it to the other side.”

3. Don’t chase the hot stock

A number of investors would believe this is the perfect time to invest in, say, telecommuting companies given corporate work-from-home policies and state-mandated shelter-in-place orders. Not necessarily, says Rogers. He maintains you may have reaped benefits in such equities six months ago before the crisis “but it’s much riskier now because you are not buying them at a bargain but you’re buying them at an end of a market.” There is a high probability, he believes, that they will face disruption within the next two years or so.

Rogers recommends individuals to buy shares of companies they understand. “You have a better chance of investing in a company that has the wherewithal and right products that will not be disrupted in the next five years.”

4. Stay calm, stay positive

Rogers is upbeat about the future, citing that the nation will emerge stronger due to the energy, ingenuity, and money that has been directed toward combatting the crisis. He is equally positive about the markets as well.

He points to Ariel’s history as exemplar of the value of staying calm in the most turbulent markets and learning from the experience. During the firm’s inception, the market was down 22% and a few years later in 1987 Rogers and his portfolio managers shrewdly invested during the 1987 stock market crash, setting the firm up for “a successful 1988 in which we were named Mutual Fund Co-Manager of the Year.” And buying stocks during the gut-wrenching economic downturn in 2008 enabled Ariel to achieve top-flight performance for its clients and recognition as No. 1 in its investment category the following year. He asserts: “We have been able to show folks that if you have the ability to buy while others are panicking, it can lead to good, long-term results. There are no guarantees but experience matters.”