T. Rowe Price Value Has an Eye for High-Quality Bargains
Manager Mark Finn made some wise purchases of beaten-down stocks in late 2018, including Air Products & Chemicals.
Value-oriented funds have had a rough go of it. For the greater part of the past decade, bargain-priced stocks have lagged the broad market. That’s what’s so remarkable about the recent performance of T. Rowe Price Value (symbol TRVLX ), a member of the Kiplinger 25, our favorite low-fee mutual funds. Over the past 12 months to August 9, Price Value has outpaced Standard & Poor’s 500-stock index and 90% of its peers—funds that focus on large-company stocks trading at a discount—with a 6.0% return. “Everything is going extremely well,” says manager Mark Finn. “I feel like this is my time.”
After the correction in late 2018, Finn began to shore up his portfolio, focusing on sectors he thought were “going to be truly safe” and sticking with high-quality firms, he says. He favors large, attractively priced companies with strong balance sheets, smart executives and solid strategies for improving their businesses. He shed some shares in telecom firms in part because of concerns about a shifting competitive landscape. And he beefed up his holdings in health care, real estate investment trusts and utilities. “I’m being picky and careful about what I buy,” he says. “My acid test is I don’t want to buy or own something unless I’m going to own it through a recession.”
One boost to the fund’s recent performance came from savvy purchases of beaten-down stocks in late 2018. Air Products & Chemicals (a member of the Kiplinger 15 list of our favorite dividend stocks), Ball Corp. and Public Storage were all late-2018 purchases. Each of those stocks has posted double-digit gains of more than 29% since the start of 2019. By contrast, the S&P 500 has gained 17.8%.
This past summer, as stocks fell over trade worries (again), Finn found a few more bargains. “Energy stocks have been obliterated,” he says. He picked up shares in giant energy firm Chevron and added to stakes in ConocoPhillips and exploration-and-production company Concho Resources.
Finn’s somewhat contrarian calls have worked against him at times. The fund had lackluster years in 2016 and 2018. But since he took over in late 2009, the fund has returned an annualized 11.8%, which beats its benchmark, the Russell 1000 Value index, by an average of 0.7 percentage point per year.