There’s something very meta about investing in an investment firm.
For investors, this can often be a way to side-invest in the market itself. When that works, it can work very well, which is why Real Money Columnist Paul Price recently looked at T. Rowe Price (TROW) – Get T. Rowe Price Group Report.
“Investment management firm T. Rowe Price is a debt-free, well-managed firm. As of Nov. 30, 2021 it had about $1.63 trillion in assets under management, Price wrote on Real Money.
“Market-related companies are often quite volatile as they react quickly to changing stock market moods. Buying the good ones, following sharp pullbacks is almost universally rewarded for investors willing to go against the crowd.”
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An investment firm will derive returns based on the strength of the overall market, adjusted by the business and trading practices of the firm itself. When you like how the firm does business that can be a value-magnifier. Their investment strategy or products can enhance strong markets and buffer against bad ones, generating more profitable returns than the market could on its own.
“That appears to be the case currently,” Price wrote. “TROW fetched as much as $224.56 last August and changed hands at nearly $199 as recently as Jan. 3. As of Feb. 4, those same shares were available at just $148.70.” (In the intervening weeks with the onset of the Russian invasion of Ukraine, the shares have fallen with the rest of the market. They closed at $139.39 on March 15.)
“T. Rowe Price is a proven long-term growth vehicle. If, already slightly reduced, 2022 estimates prove accurate, EPS will still have grown by around 264% over the past decade,” Price said.
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Paul Price joined Merrill Lynch in 1987 and over the next 13 years worked with A.G. Edwards, Wheat First and Ferris, Baker Watts. Dr. Price enjoyed enough success to retire in October 2000, but he continues to write and give investment seminars.