Editor's note: This is part of a continuing series of articles looking at the 20 biggest no-load stock funds.
There's nothing like a long-term track record to instill investors' confidence in a fund manager. Steady Brian Rogers has steered T. Rowe Price Equity Income with aplomb since the fund's launch in 1985. In 2006 Roger had another bang-up year: Equity Income returned 19%, beating Standard & Poor's 500-stock index by more than three percentage points.
Rogers searches for large-company value stocks with relatively low price-earnings ratios and high yields. "Undervaluation and dividend focus keep you out of trouble in difficult market environments," he says. Thus, his fund lagged in the crazy market of 1998-99 but held up well in the grizzly 2000-02 bear market, losing just 9% while the S&P 500 tumbled 47%.
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Rogers notes that he's finding value in traditional large-cap growth stocks, such as Eli Lilly and General Electric. He likes to hold companies, including ExxonMobil and Citibank, that are financially strong enough to increase their dividends each year. A patient investor, Rogers holds stocks five years on average. He recently purchased or increased holdings in Home Depot, Fortune Brands, Coca-Cola and H&R Block, the latter because management is under pressure to improve performance.
When it was launched in 1985, Equity Income was designed to be a conservative stock fund aimed at investors saving for retirement. Twenty-two years later, it still fulfills that role admirably. It's a BUY.
FUND FACTS
T. Rowe Price Equity Income (PRFDX)
Assets: $23.6 billion
Manager (year started): Brian Rogers (1985)
Returns (vs. S&P 500)*
2006: 19.1% (15.8%)
Three years annualized: 12.6% (10.4%)
Five years annualized: 9.4% (6.2%)
Ten years annualized: 10.1% (8.4%)
Expense ratio: 0.71%
Portfolio turnover: 21%
Initial minimum investment: $2,500
Phone: 800-638-5660
Web site: www.troweprice.com
*Returns through Dec. 31
Fund Fact sources: Standard & Poor's, Morningstar
View updated data for this fund and compare the performance of the 20 biggest no-load stock funds.
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