Buy. Hold. Profit. Give Back.
Ariel Capital's John Rogers built an outstanding record investing in a few "great ideas" for the long run. Then he had his own idea: to launch a school to teach inner-city kids about money.
(Money Magazine) -- John W. Rogers Jr. is a patient man. The head of Ariel Capital Management in Chicago and manager of the flagship Ariel Fund (Charts), Rogers typically holds a stock for four or five years, an eternity compared with the 14-month holding period of the average mutual fund.
In the past decade his fund has earned nearly 14 percent a year, beating the market by more than five percentage points annually and outperforming three-quarters of all similar funds.
Rogers has pulled off this feat while investing much of his own time in two problems that many other leaders have long since given up on: improving inner-city schools and encouraging African Americans to save and invest more.
Rogers donates a hefty share of his firm's profits, helps design teaching curriculums, meets with children and educators, and brings students along to board meetings. Here too, patience is paying off: 80 percent of the eighth-graders who graduate from Ariel Community Academy have been accepted to elite high schools in the Chicago area.
Recently, Rogers spoke with Money Magazine's Jason Zweig.
Question: You were in your mid-twenties when you started managing money. Most people aren't very patient at that age.
Answer: I really did believe that the most successful investments were the ones that you could own for the long run. I remember reading about the great stocks of a generation ago - McDonald's (Charts, Fortune 500) and Coca-Cola (Charts, Fortune 500) - and Warren Buffett talking about how great brands would just multiply and multiply.
I wanted to buy companies where I could look back 20 years later and say, "You know, I bought this at $2 and now it's at $200."
Question: Easier dreamed than done.
Answer: I also believed that there were not that many great ideas out there. So once you found one, you really wanted to hang on to it. You didn't want to be constantly trading and searching for something better -because it's probably not there.
Question: So tell us a couple of those great ideas right now.
Answer: We like McClatchy (Charts) and City National Corp. (Charts) We think McClatchy's local newspapers will be successful in capturing local readership and advertisers in a way that national Internet giants simply cannot.
City National Corp. is the parent of City National Bank, a premier private and commercial banking franchise based in California. The bank was hurt by the rise in short-term interest rates, but we consider it best-in-class, and the market is beginning to appreciate the company once again.
Question: Where did you learn the patient touch?
Answer: [At Princeton] I played basketball for Coach [Pete] Carril [legendary for his painstaking "four corners" offense]. He made us work the ball around and around until we could get a shot we were pretty sure we could make.
Back then, you know, we didn't have a shot clock. Coach Carril taught us if you took your time, eventually the great opportunity would show up.
Question: Why don't African Americans save and invest more?
Answer: I think it comes down to public education. The "three Rs" need to be the three Rs and an I: reading, writing, arithmetic and investing. Financial literacy is just as important in life as the other basics.
Question: How have you tackled that problem?
Answer: We wanted to start with very young kids. So we adopted a public school on Chicago's South Side and made investing part of the curriculum.
We give a $20,000 class gift to the first grade and manage it, with John Nuveen & Co., until they are in sixth grade. Then the kids take over and pick real stocks with this real money.
When they graduate in eighth grade, they give the original $20,000 back to the incoming first grade. They donate half of any investing profits to the school and divide up the rest.
With that money each student opens a 529 college savings account, to which we donate another $1,000. So they leave with something tangible. And the investment curriculum helps these kids with their math skills; the test scores are really high.
Question: Thanks! Can I follow up by e-mail? [Silence.] John?
Answer: [Pause.] I don't have an e-mail address.
Question: You manage $16 billion without e-mail?
Minds over Money: In honor of Money Magazine's 35th anniversary, we're running special interviews with the smartest thinkers we've come across in three-plus decades.
Bill Sharpe: The man who explained it all
Robert Shiller: Mr. Worst-case scenario
Jack Bogle: Still scolding after all these years
Olivia Mitchell: Scholar of the boomers' future
Ralph Wanger: Winning the home run hitter's game
Charles Schwab: The smartest way to invest