The Greatest Investors: Thomas Rowe Price, Jr.
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  1. Greatest Investors: Introduction
  2. The Greatest Investors: John (Jack) Bogle
  3. The Greatest Investors: Warren Buffett
  4. The Greatest Investors: David Dreman
  5. The Greatest Investors: Philip Fisher
  6. The Greatest Investors: Benjamin Graham
  7. The Greatest Investors: William H. Gross
  8. The Greatest Investors: Carl Icahn
  9. The Greatest Investors: Jesse L. Livermore
  10. The Greatest Investors: Peter Lynch
  11. The Greatest Investors: Bill Miller
  12. The Greatest Investors: John Neff
  13. The Greatest Investors: William J. O'Neil
  14. The Greatest Investors: Julian Robertson
  15. The Greatest Investors: Thomas Rowe Price, Jr.
  16. The Greatest Investors: James D. Slater
  17. The Greatest Investors: George Soros
  18. The Greatest Investors: Michael Steinhardt
  19. The Greatest Investors: John Templeton
  20. The Greatest Investors: Ralph Wanger

The Greatest Investors: Thomas Rowe Price, Jr.

Thomas Rowe Price, Jr.

Born: Linwood, Maryland, in 1898; Died in 1983
Affiliations:
    • Mackubin Goodrich & Co.
    • T. Rowe Price Associates, Inc.
    Most Famous For: Price is considered to be "the father of growth investing." He founded the investment firm T. Rowe Price Associates, Inc.

    Personal Profile

    Thomas Rowe Price spent his formative years struggling with the Depression, and the lesson he learned was not to stay out of stocks but to embrace them. Price viewed financial markets as cyclical. As a "crowd opposer," he took to investing in good companies for the long term, which was virtually unheard of at this time. His investment philosophy was that investors had to put more focus on individual stock-picking for the long term. Discipline, process consistency and fundamental research became the basis for his successful investing career. .

    Price graduated from SwarthmoreCollege with a degree in chemistry in 1919 before discovering that he liked working with numbers better than chemicals. He moved into a career in investments when he started working with the Baltimore-based brokerage firm of Mackubin Goodrich, which today is known as Legg Mason. Price eventually rose to become its chief investment officer.

    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.

    Investment Style
    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.

    Quotes

    "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

    1. Greatest Investors: Introduction
    2. The Greatest Investors: John (Jack) Bogle
    3. The Greatest Investors: Warren Buffett
    4. The Greatest Investors: David Dreman
    5. The Greatest Investors: Philip Fisher
    6. The Greatest Investors: Benjamin Graham
    7. The Greatest Investors: William H. Gross
    8. The Greatest Investors: Carl Icahn
    9. The Greatest Investors: Jesse L. Livermore
    10. The Greatest Investors: Peter Lynch
    11. The Greatest Investors: Bill Miller
    12. The Greatest Investors: John Neff
    13. The Greatest Investors: William J. O'Neil
    14. The Greatest Investors: Julian Robertson
    15. The Greatest Investors: Thomas Rowe Price, Jr.
    16. The Greatest Investors: James D. Slater
    17. The Greatest Investors: George Soros
    18. The Greatest Investors: Michael Steinhardt
    19. The Greatest Investors: John Templeton
    20. The Greatest Investors: Ralph Wanger
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