Abby Joseph Cohen * is a panelist in “Round II” of Barron’s Annual Roundtable (current Barron’s print edition). Her five recommendations for investment in 2023 include TROW. Some interesting thoughts about the firm as well about active management.
(Cohen): “My last pick is T. Rowe Price [TROW] … We are entering a period when good active management of portfolios is going to make a difference, after an extended time in which the market was largely momentum-driven. People invested in market-capitalization-weighted index-oriented strategies, such as exchange-traded funds, which became self-fulfilling ‘prophesies’, until they didn't. This approach led to a high concentration in the indexes of a small number of stocks which grew overvalued. A handful of good active managers were left by the wayside …..
“The company's mutual funds outperformed their benchmarks 76% of the time in the past 10 years. T. Rowe … pioneered no-load mutual funds. The idea was to provide a high-quality product with low fees. The company's funds still tend to have fees at the lower end of the spectrum. The stock hasn't performed well in the past year, and it has an attractive valuation. It is trading for 13 times trailing 12-month earnings, with a dividend yield of 4.3%. The consensus earnings estimate for next year is $7.74 a share …..
”If you believe that the U.S. economy will expand, T. Rowe will grow with it. The P/E ratio and dividend yield offer a layer of protection. The 52-week range on the stock is $93 to $194. The stock was trading on Jan. 6 at around $112. The concerns are priced in. What isn't priced in is greater interest in active investment.”
(Excerpted from Barron’s - January 23, 2023 / edited for brevity)
* Cohen once worked at T. Rowe Price as an analyst and had a long distinguished career at Goldman Sachs. She currently teaches business at Columbia University, NYC.