FA Magazine May 2022 | Page 56

ferent style boxes because I didn ’ t have a style-box-specific framework .”

Employing this flexible approach as a portfolio manager helps explain why the fund has been a top-quartile performer in Morningstar ’ s large-growth category during the past five years under White ’ s leadership ( it also sports a top-quartile ranking over the 10- and 15-year periods ). As part of that , the fund has produced a higher upside capture ratio and lower downside capture ratio than the category average over the five-year period , according to Morningstar .

In her report on the All-Cap Opportunities Fund last summer , Morningstar analyst Katie Rushkewicz Reichart noted that roughly half of the portfolio ’ s assets at that time resided outside of the largegrowth section of the Morningstar style box , which she said supported the change from the Russell 1000 Growth Index to the Russell 3000 . She added that the fund was expected to remain in the large-cap growth category , though fund rating company Lipper classifies it as a multicap growth fund . ( Morningstar doesn ’ t have an all-cap style box category .)

Regardless , White says one of the reasons he pushed for the fund name and benchmark changes was that he felt growth investing ’ s period of outperformance could be running out of gas . He initiated the call for the changes in 2020 just as the pandemic was starting , though he emphasized it wasn ’ t related to the pandemic .

“ I wanted the flexibility to pivot opportunistically the other way if the moment came where it made sense to own more value-oriented stocks ,” he says . While it

Portfolio Statistics

Portfolio stats as of 12 / 31 / 21 . Standard deviation ( five-year period ) versus the Morningstar US Large-Mid Broad Growth Total Return USD Index as of 3 / 31 / 22 . Sources : T . Rowe Price and Morningstar .

Manager Justin White Age 41

Professional Background He joined T . Rowe Price after attaining his MBA in 2008 . He was a buy-side equity analyst for nearly eight years before attaining his current portfolio manager position .

Outside Interests He and his wife have an apartment in Berlin where they spend the summers . Other interests include collecting wines , bicycling and traveling .

took a year for the changes to become official , White says he began repositioning the portfolio after it became likely that the changes would go through .

He said the Fed ’ s interest rate and inflation focus meant that for the first time in 12 years the central bank wasn ’ t going to rescue markets . “ The thing that emboldened me to sell a lot of stocks was when I realized that inflation would be with us at a higher level and for a longer period , and that the Fed wasn ’ t going to bail us out because it had to slay inflation ,” he explains .

Among his allocation moves , White closed out the fund ’ s position in Meta Platforms , formerly known as Facebook , given the uncertainty about the company ’ s strategic shift toward the metaverse . He also eliminated positions in global gaming platform company Roblox , Zoom Video Communications Inc . and Block Inc ., the digital payments outfit formerly known as Square Inc . In addition , he sold shares in Google ’ s parent company , Alphabet Inc ., as part of efforts to move some tech profits into real economy names he believes have attractive risk / reward profiles .

Nonetheless , Alphabet remained the fund ’ s third-largest position ( with a weighting of 4.3 % as of March 31 ). White still views the company as a valuable holding thanks to its dominant role in the internet and its ability to cash in on the digital economy .

Meanwhile , White added to stocks he believes trade at reasonable valuations and could benefit from higher interest rates , such as financial services giants Charles Schwab Corp . and Chubb Ltd . He also put money into companies that

could do well in a rising rate or higherinflation environment , including O ’ Reilly Automotive ; Waste Connections , a waste collection and recycling company ; and Middleby Corp ., which makes equipment for the food services industry .

And he pounced on select opportunities in the energy sector . One of those is Halliburton Co ., an energy services company that , among other things , rents pressure-pumping equipment to the U . S . fracking industry .

“ The reality is that during the past five years there was huge underinvestment in the rig fleets , and the market is now running very tight ,” White says . “ The current high oil prices incentivizes for more production , but there aren ’ t any rigs available , and it takes a year-plus to bring new rigs online .”

Such conditions should produce a big price squeeze in day-rate rentals of Halliburton ’ s equipment , which he believes is not captured in analysts ’ expectations .

“ Despite oil prices going crazy year to date , there have been no revisions in earnings estimates for Halliburton , so they ’ re way too low for this year ,” White says .

The portfolio repositioning has tempered the pain somewhat for this fund in the tumultuous early days of 2022 . The fund lost 7.2 % through April 7 , but that was five percentage points better than the Morningstar large-cap growth category ’ s average loss , landing it in the category ’ s top quartile year to date .

Investment Pillars

White is backed up by T . Rowe Price ’ s sizable investment research team , which he credits for bringing to his attention

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