Consumer Stocks Could Rally After AI Trade Fades, Rogers Says

John Rogers, co-CEO of Ariel Investments, believes consumer stocks that are currently overlooked will gain once the artificial-intelligence sector loses steam. He points out that many consumer brands trade at less than 10 times their projected earnings for next year, listing J.M. Smucker among four selected stocks.

The S&P 500 index settled above 7,800 for the first time on Tuesday, boosted by semiconductor stocks. But Rogers, whose investment firm specializes in value strategies, observes a pattern similar to what existed before the internet bubble burst in 2000.

Could Overshadowed Equities Mirror the Post-2000 Rebound?

Since late 2022, investors have been pouring money into AI-related technology stocks. Optimism over AI earnings drove the Dow Jones Industrial Average and the S&P 500 to record highs on August 4. Yet many companies outside the tech sector have fallen behind. Nevertheless, one of Rogers' selections, the J.M. Smucker Company, is currently matching the performance of AI giant Nvidia.

Over the past six months, Smucker has risen almost 26%, while Nvidia has gained 28%.

Rogers noted on CNBC's "Squawk Box" on Wednesday that historically, after 2000, smaller and less fashionable companies outperformed the broader market for several years.

The Ariel CIO added that he hasn't observed such deep discounts in two to three decades. He offered this explanation.

“They’re selling at bargains because they are not the sexy things to own.”

John Rogers, who serves as co-CEO and CIO of Ariel Investments, spoke on CNBC.

Why Rogers Believes AI Poses No Threat to These Four Stocks

OneSpaWorld, which runs spa services on cruise ships, has risen roughly 11% this year. FactSet, a financial-data provider shows analysts' consensus price target suggests a 36% increase.

Madison Square Garden Entertainment, which operates venues such as Radio City Music Hall, has climbed approximately 49%.

Sphere Entertainment, which runs the Las Vegas entertainment arena, has advanced more than 8%. Rogers contends that AI won't disrupt neither of these companies because people have a desire for live entertainment.

J.M. Smucker, the maker of Folgers coffee and Jif peanut butter, has gone up 25% over the past half-year. Furthermore, analysts' average price target points to an additional 21% gain in the coming year. Rogers says consumers will purchase its goods irrespective of AI's presence.

Rogers acknowledges that no one can predict when the turning point will occur. By contrast, technology stocks make up about one-third of the S&P 500. The index's ten largest components carry nearly 40% of its weight, as BeInCrypto pointed out during the discussion on the AI bubble.