These bargain stocks will shine when AI trade falters, says Ariel’s John Rogers
Investors are overlooking quality companies that are poised to breakout when the artificial intelligence trade falls apart, according to John Rogers, founder of Ariel Investments. Tech stocks have been pushing the market to new highs since late 2022 as investors bet on the future of AI, although lately it hasn’t been a smooth ride. On Tuesday, the S & P 500 closed above 7,800 for the first time, boosted by chipmaking stocks. The attention on AI has left many non-tech companies behind. But Rogers expects there to be a turning point, similar to another time when tech stocks drove up market valuations. “You never know when the exact inflection point is going to happen, but it does remind of how the internet bubble burst in 2000 and sort of the boring, smaller companies exploded from the bottom and outperformed for several years,” said Rogers, who is also Ariel’s co-CEO and chief investment officer. “I feel that it’s the same situation today.” Today, that means investors can snap up some deals before the shift. “So many world-class consumer brands [are] selling at less than 10x next year’s earnings. I’ve never really seen that in this last 20, 30 years,” he said in an interview on CNBC’s Squawk Box ” on Wednesday. “They’re selling at bargains because they are not the sexy things to own.” Top picks Rogers sees value in consumer brands that will not be undermined by AI. That includes OneSpaWorld , a health and wellness company that provides spa services on cruise ships. Shares are up about 11% year to date. The stock has an average analyst rating of buy and 36% upside to the average price target, according to FactSet. He also likes Madison Square Garden Entertainment and Sphere Entertainment . Madison Square Garden runs a number of sports and entertainment venues, including its namesake and Radio City Music Hall. Sphere owns and operates its entertainment arena in Las Vegas, as well as MSG Networks. “People want entertainment,” the Ariel founder said. “AI is not going to disrupt the business.” SPHR YTD mountain Sphere Entertainment year to date Madison Square Garden has gained roughly 49% so far this year, while Sphere has moved more than 8% higher. Analysts agree both have room to further advance. Madison Square Garden has an average rating of overweight and 16% upside to analysts’ consensus price target, while Sphere has an average rating of buy and implied appreciation of 64%, based on the consensus target, according to FactSet. Food and beverage company J.M. Smucker has products that consumers want whether AI is here or not, said Rogers. Its brands include Folgers coffee, Jif peanut butter and Smucker’s jams and jellies. The stock is up 20% in 2026. Analysts covering Smucker give it an average rating of overweight, and their average price target would translate into 21% upside in the coming year, FactSet data shows. Investors can’t go wrong with any of the names, Roger noted. “We think those businesses will really shine going forward,” he said.
About the Author
