Thomas Rowe Price, Jr.

Born: Affiliations: Linwood, Maryland, in 1898; Died in 1983 Mackubin Goodrich & Co. T. Rowe Price Associates, Inc.

Most Famous Price is considered to be "the father of growth investing." He founded For: 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 Swarthmore College 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.

Growth investing
Growth investing is a style of investment strategy. Those who follow this style, known as growth investors, invest in companies that exhibit signs of above-average growth, even if the share price appears expensive in terms of metrics such as price-to-earnings or price-to-book ratios. In typical usage, the term "growth investing" contrasts with the strategy known as value investing. However, some notable investors such as Warren Buffett have stated that there is no theoretical difference between the concepts of value and growth ("Growth and Value Investing are joined at the hip"), in consideration of the concept of an asset's intrinsic value. In addition, when just investing in one style of stocks, diversification could be negatively impacted. Thomas Rowe Price, Jr. has been called "the father of growth investing"

INVESTMENT APPROACH. Our approach to managing investments is rooted in fundamental research, distinguished by discipline, and carried out by experienced professionals. Research is the lifeblood of our investment organizations We believe that fundamental, proprietary research drives value-added, active management. To put this belief into practice, we maintain a powerful global research platform that includes interconnected teams of research analysts. It starts with bottom-up analysis. One hundred eighty five specialized analysts across the globe focus on finding opportunities for our clients. These are bright and capable professionals, driven to find insights both qualitative and quantitativethat support investment recommendations and, ultimately, decisions. But what makes this platform so effective is the culture that supports itone in which ideas are shared and debated, and knowledge is transferred across geographies and sectors. The result: Ideas translate into well-informed investment decisions. Discipline has distinguished our approach for over seven decades T. Rowe Price has been managing assets for clients since 1937. Through all types of market environments, we have kept our heads down, fine-tuned our process, and focused on long-term results.

Consistency is a hallmark of our investment process. By adhering to stated investment objectives and style, regardless of market conditions or fashion, we help ensure the long-term integrity of client portfolios. We are also keenly focused on risk management. Our professionals assess risk and potential rewards at the security and portfolio level for all strategies. All portfolios are managed to provide long-term reward commensurate with risk accepted. A seasoned investment team means continuity for our clients There is no substitute for experience. T. Rowe Price portfolio managers have an average of 19 years' investment experience and 13 years' tenure with the firm. Because of this individual expertise and collective experience, we are able to keep rapidly evolving markets in historical perspective. We are able to hone our investment approach through changing economic conditions. And we are able to thoughtfully focus on our ultimate goalconsistent, competitive performance for our clients.

What did T. Rowe Price consider a growth stock? Today, stocks generally fall into two categories, growth or value. A value stock is one that is considered to be trading at a lower price relative to its fundamentals such as P/E Ratio, discounted cash flow, etc. A growth stock, on the other hand, is a stock that appreciates in value and has yields a high return on equity (ROE). T. Rowe Price looked for certain things when he sought a growth stock to invest in. He looked for a company with superior research and development, a lack of intense competition from competitors, lack of government regulation, low total labor costs, 10% return on invested capital, high profit margins, and growth in earnings per share (EPS).