FUND WATCH


New Management for T. Rowe Price Growth Stock

Rob Bartolo is already putting his stamp on this Kiplinger 25 member by overhauling the fund's holdings.



Look for a slightly more aggressive portfolio for T. Rowe Price Growth Stock (symbol PRGFX) now that Rob Bartolo is manager.

The Kiplinger 25 member, with assets of $26 billion, is the largest mutual fund in the Baltimore-based asset manager's fund family. Bartolo, former co-manager of T. Rowe's Media & Telecommunications fund, took the reins of Growth Stock in September from Bob Smith, who had a fine ten-year run.

"I'm probably more comfortable than Bob investing in faster-growing companies," says Bartolo. "Bob was a little more contrarian than I am." Bartolo also says he expects to let his winners run longer than Smith would: "A great company can go a lot higher over time than the human mind can understand."

Bartolo has shown his yen for growth by tripling the fund's position in Apple (AAPL), bringing the Macintosh and iPod maker into the ranks of top ten holdings. "Apple has much more sustainable technology than many technology companies," Bartolo says.

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Apple, he adds, locks in customers through the iTunes platform and iPod hardware. Once a customer owns an iPod, he or she might consider buying a Macintosh computer.

Bartolo has also built a position in Nintendo (NTDOY.PK, the Japanese video game maker. "In times of economic uncertainty, people will still buy their kids video games," he says.

The uncertain times in mortgage and credit markets have led Bartolo to overhaul the fund's holdings in financials. Out went companies with exposure to subprime loans, such as Countrywide Financial (CFC), E*Trade Financial (ETFC), American International Group (AIG) and UBS (UBS).

Instead, he's purchased or added to financial companies with "clarity of business model and transparency," such as Moody's (MCO), McGraw-Hill (MHP), Franklin Resources (BEN) and Bovespa, a Brazilian company that owns the Sao Paulo Stock Exchange.

Bartolo also has strong views on health care. He seems somewhat uncomfortable with big drug companies, which are dependent on a benign political outcome in next year's elections and patent approvals from a Food and Drug Administration that he regards as increasingly hostile.

So he dumped Eli Lilly (LLY)and Novartis (NVS), but increased positions in or purchased more-predictable health care holdings such as Becton Dickinson (BDX); Wellpoint (WLP), CVS Caremark (CVS), Zimmer (ZMH) and Laboratory Corporation of America (LH).

Anticipating weaker consumer demand at home, Bartolo has sold out of Coach (COH) and reduced exposure to cyclicals such as Kohl's (KSS) and Target (TGT).

Instead, he's purchased less cyclical consumer plays like Costco Wholesale (COST) and YUM Brands (YUM), operator of such fast food chains as KFC and Pizza Hut.

He also says he's essentially shifted some of his portfolio of consumer stocks from the U.S. to Brazil, buying shares in Brazilian credit card, department store and e-commerce companies.

Growth Stock has a solid and consistent long-term record. Over the past ten years through November 30, it returned 8% annualized, beating Standard & Poors 500-stock index by an average of two percentage points per year. Year to date through December 19, the fund returned 8%, nearly double the return of the S&P 500. This no-load fund has a modest annual expense ratio of 0.70%



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