This month, we screen for attractive “bond replacement” investment candidates using new holdings of the Ariel Focus Fund (ARFFX), managed by Charles K. Bobrinskoy.

We have selected the stocks that this fund reported purchasing in the second quarter of 2016 (the latest period for which data was available) and have limited the list based on two criteria:

  1. Stocks listed represented more than 1% of the portfolio’s value
  2. Stocks listed had been bought by the fund in the reported quarter

These conditions were to screen for the stocks in which the managers had demonstrated the most confidence (by portfolio weight) and about which they had made an active decision to invest. As we explain in our video introduction to “Bond Replacement” investments, we are using these portfolio managers’ actions as an indication of undervaluation.

Morningstar’s report on this fund may be found here, and a prospectus for the fund may be found here. Morningstar does not think highly of this fund, but it has outperformed the index over the last one- and five-year period, largely because of its resilience since the late summer of last year. The reporting is for the second quarter of 2016, so is a bit dated, but there are five firms, the Effective Buy Price of which are within 10% of the reported purchase price: Laboratory Corp (LH), St Jude (STJ), Zimmer Biomet (ZBH), Apache (APA) and KKR & Co. (KKR).

Please reach out if you have any questions about this spreadsheet!