portfolio spotlight
the vast majority of holdings in the fund . Still , he employs his own selection method for which investment ideas ultimately make the cut .
“ It ’ s up to the P . M .’ s judgment to figure out which companies they ’ re comfortable with and how big a bet they should make ,” he says , adding that his approach to securities selection is based on a four-pillar investment framework that he has used since 2011 , when he was an analyst .
The first pillar relates to quality . “ You can ’ t just put it into a computer algorithm and say , ‘ Here ’ s the quality .’ There ’ s a lot of pattern recognition over time that tells you if this is a good business with secular tailwinds at its back and whether it ’ s well managed ,” White says . “ It ’ s a collection of various factors , and there ’ s definitely a judgment overlay there .”
The next pillar is whether T . Rowe Price ’ s expectations for a company are above or below the consensus opinion . Then there ’ s a “ better or worse ” pillar that assesses the outlook for a company ’ s performance in the coming year . And finally , there ’ s a valuation pillar . “ Valuation is more art than science ,” White offers . “ I ’ ve always had an appreciation that valuation does matter .”
His belief is that history rhymes over long cycles , and that periods of market multiple expansion and compression ebb and flow over extended periods . So he thinks the times could be a-changin ’ when it comes to which areas will lead the market in coming years .
He says profitless tech is unwinding in a way that mirrors the Nasdaq bubble ’ s burst in 2000 . “ And with the economy overheating and the Fed raising rates to cool it down , it just feels like a different world now . I think people should be open-minded to the idea that market leadership could be quite different over the next five to 10 years than it was over the past decade . This fund hopefully will be able to capitalize on the shifting tides given that it has a flexible mandate and is able to opportunistically go from growth to value and from large cap to small cap .”
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“ photography courtesy of t . rowe price may 2022 | financial advisor magazine | 55