It is high summer, and the market continues to edge higher in spite of the constant caterwauling about a recession. As I write this, oil is at $74.80 a barrel, the Nasdaq hit 14,222, and gold is trading at $1,958 an ounce.
While we wait for the next batch of earnings later in the week, let's continue our series on famous investors. Perhaps we can learn a thing or two by seeing how they got rich.
In the world of investing, there are a few individuals whose names became synonymous with success, wisdom, and innovation. Among these revered figures, T. Rowe Price stands tall as a true pioneer who revolutionized the investment landscape.
The Birth of a Visionary
Thomas Rowe Price Jr., known as T. Rowe Price, was born on March 16, 1898, near Baltimore, Maryland. From where I write this, you can just make out the corner of the T. Rowe Price headquarters near the Inner Harbor.
From an early age, Price displayed a remarkable aptitude for numbers and a deep curiosity about financial markets. After earning his bachelor's degree in chemistry from Swarthmore College, Price initially pursued a career in chemistry but soon realized his true passion lay in the world of finance.
The Birth of T. Rowe Price Associates
In 1937, at the age of 39, Price left the precursor of Legg Mason and founded T. Rowe Price Associates. His firm struggled through the Great Depression and World War II but eventually became profitable as a wealth management firm. He believed that commission-based brokerages were unethical and instead built a good reputation by combining growth investing with a no-load fee system for clients.
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Price's Investment Philosophy
Price's investment philosophy was centered on the belief that long-term investing, supported by thorough research and disciplined decision-making, was the key to wealth creation. He advocated for investors to focus on the intrinsic value of companies, their long-term growth potential, and the quality of their management teams. Price was also an advocate of diversification as he understood the importance of spreading investments across different asset classes and industries to mitigate risk.
A Trailblazer in Mutual Funds
Price was a trailblazer in the mutual fund industry. In 1950, he introduced the first mutual fund that allowed individual investors to gain exposure to a diversified portfolio of stocks. This innovation revolutionized the investment landscape, making it more accessible and affordable for individual investors to participate in the stock market.
Later on, T. Rowe Price Associates pioneered target date retirement accounts.
Commitment to Research
Price recognized the critical role of research in making informed investment decisions. He assembled a team of talented analysts who conducted thorough, fundamental research to identify companies with long-term growth potential. This commitment to research became a cornerstone of T. Rowe Price Associates, setting the firm apart and contributing to its consistent success.
Long-Term Vision
One of Price's greatest strengths was his ability to think long term. He encouraged his clients to adopt a similar mindset, emphasizing the importance of patience and avoiding short-term market noise.
The Legacy Continues
Even after his passing in 1983, Price's legacy continues to thrive. T. Rowe Price Group, now a global investment management firm, remains committed to Price's founding principles, which kept it out of the dot-com bubble.
The company has a solid reputation and continues to prioritize its clients' interests, offer a wide range of mutual funds, and maintain a strong focus on research and long-term investing. If I won the lottery or got an NBA contract, it's where I’d go for advice.
The company went public on the Nasdaq in 1986 with a market cap of $200 million and the ticker symbol TROW. Today, T. Rowe has a market cap of $26 billion, with a share price of $117 and a forward dividend yield of over 4%. That said, the stock is well off its highs of $225 a share, which topped out in 2021.
Still, if you had invested $10,000 in 1986, it would be worth $1.51 million today including dividends — and that’s after the stock got crushed last year.
Since 2010, the company has increased assets under management from $400 billion to over $1.6 trillion and is now No. 447 on the Fortune 500 list of largest U.S. companies.
The chart shows a consolidation pattern with plenty of support at $105. If you think the Fed is going to start cutting rates next year — and it does seem likely — you might want to put some money in T. Rowe Price.
All the best,
Christian DeHaemer Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
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