Rogers of Ariel Asset Management Sees Undervalued Opportunities in Energy and Defense Amid Market Volatility

David Rogers, portfolio manager at Ariel Asset Management, has shifted focus toward defensive sectors amid elevated market uncertainty. With the S&P 500's volatility index, ^VIX, hovering near 22.4 as of early March 2026, Rogers sees opportunity in equities that offer stability and dividend resilience. He emphasizes Apple (AAPL) as a core holding, noting its $2.8 trillion market cap and consistent free cash flow generation of $102 billion in FY2025, which supports long-term capital allocation flexibility. Rogers also highlights the energy sector, particularly crude oil futures (CL=F), which have traded in a narrow band around $88 per barrel. He argues that sustained global demand and constrained supply from geopolitical tensions in the Middle East are underpinning prices, creating value in integrated energy firms with strong balance sheets. One such name, ExxonMobil, has delivered a 12% return on equity in 2025, outpacing the broader S&P 500's 7.8% average. In defense, Rogers points to companies with multi-year contracts and growing R&D investments, noting that U.S. defense spending reached $895 billion in FY2025—a 4.2% increase year-over-year. He specifically values Lockheed Martin and Northrop Grumman for their exposure to next-generation aerospace platforms and cybersecurity infrastructure, both sectors seeing accelerated procurement. The strategy reflects a broader pivot toward quality and capital preservation, especially as short-term market noise persists. These positions are not only resilient to inflationary pressures but also benefit from structural tailwinds in energy security and national defense.