The Greatest Investors: Thomas Rowe Price, Jr.
|Thomas Rowe Price, Jr.|
|Most Famous For:||Price is considered to be "the father of growth investing." He founded the investment firm T. Rowe Price Associates, Inc.|
Price graduated from
Over time, Price became frustrated by the fact that "the firm did not fully comprehend his definition of growth stocks," so Price founded T. Rowe Price Associates in 1937. At that time, he defied convention by charging fees based on investments that clients had with the firm, not commissions, and always "putting the client's interests first." Price believed that as his clients prospered, the firm would too.
In 1950, he introduced his first mutual fund, the T. Rowe Price Growth Stock Fund. He was the company's CEO until his retirement in the late 1960s. He eventually sold the company in the early 1970s, but the firm retained his name and, today, one of the nation's premier investment houses.
Thomas Rowe Price's investment management philosophy was based on investment discipline, process consistency and fundamental analysis. He pioneered the methodology of growth investing by focusing on well-managed companies in fertile fields whose earnings and dividends were expected to grow faster than inflation and the overall economy. John Train, author of "The Money Masters", says that Price looked for these characteristics in growth companies:
- Superior research to develop products and markets.
- A lack of cutthroat competition.
- A comparative immunity from government regulation.
- Low total labor costs, but well-paid employees.
- At least a 10% return on invested capital, sustained high profit margins, and a superior growth of earnings per share.
Price and his firm became extremely successful employing the growth stock approach to buying stocks. By 1965, he had spent almost thirty years as a growth advocate. At that time, many of his favorite stocks became known in the market as "T. Rowe Price stocks." However, by the late '60s, he had become wary of the market's unquestioning enthusiasm for growth stocks – he felt the time had come for investors to change their orientation. He thought price multiples had become unreasonable and decided that the long bull market was over. This is when he began to sell his interests in T. Rowe Price Associates.
By 1973-1974, what Price's forecast took shape and growth stocks fell hard and fast. Much to Price's dismay, his namesake firm barely managed to survive. Obviously, the term, "irrational exuberance" didn't exist in those days, but its destructive force was well appreciated by Thomas Rowe Price.
"It is better to be early than too late in recognizing the passing of one era, the waning of old investment favorites and the advent of a new era affording new opportunities for the investor."
"If we do well for the client, we'll be taken care of."
"Change is the investor's only certainty."
"No one can see ahead three years, let alone five or ten. Competition, new inventions - all kinds of things - can change the situation in twelve months."
The Greatest Investors: James D. Slater
Founder of the Baltimore-based investment management firm T. ...
One of the most successful and well known investors of all time. ...
Michael Bloomberg is one of the wealthiest persons in the world ...
Henry Paulson served as the 74th U.S. Secretary of the Treasury. ...
1. A projected price level as stated by an investment analyst ...
A form that FINRA requires brokers to use for reporting equity ...
Warren Buffett may have been born with business in his blood. He started saving while other children were at the playground, ... Read Answer >>
Learn what diversification and a hedge are, how investors can diversify and hedge their investments, and the main difference ... Read Answer >>
Learn more about risk profiles and speculation, why speculators should assess their risk profiles and how risk profiles and ... Read Answer >>
Learn what risk avoidance and risk reduction are, what the differences between the two are, and some techniques investors ... Read Answer >>
Discover the main ways to take advantage of a fall in bank stocks. Shorting stocks and buying put options can let traders ... Read Answer >>
Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences. Read Answer >>
You May Also Like