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
The market where borrowers and mortgage originators come together ...
A mortgage loan in which the borrower receives a loan amount ...
A type of mortgage in which a homeowner can borrow money against ...
An institution or individual that works with a borrower to complete ...
The market where mortgage loans and servicing rights are bought ...
A group of mortgages held in trust as collateral for the issuance ...
Learn the difference between a money market account and a money market fund. Both savings vehicles are relatively safe, but ... Read Answer >>
Explore the factors that make Belize one of the most modern and corporate-friendly tax havens in the world, including its ... Read Answer >>
The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
Learn why some home buyers are required to take out private mortgage insurance (PMI), and how it affects the total monthly ... Read Answer >>
When you make a mortgage payment, the amount paid is a combination of an interest charge and principal repayment. Over the ... Read Answer >>
Get informed about Roth IRAs, which have a few disadvantages, including limited access to funds and contribution limits based ... Read Answer >>