Among active managers, [TROW] is best of breed. The current multiple to 10 to 11 times is unheard of for T. Rowe – Morningstar Analyst Greggory Warren (quoted in “Markets Won’t Sink Forever. Asset Manager Stocks Are A Cheap Play On A Recovery” [SUBSCRIPTION REQUIRED], Andrew Bary, Barron’s, June 18)
I know, I know: Nobody wants to buy stocks right now so how can I be recommending a mutual company? Because that could change very quickly. The slightest pivot from the Fed away from its ultra hawkish stance on inflation would likely mean the bottom for the year is in. And were that to happen investors would start to pile in to stocks again looking for value and speculating on a bottom. And that means buying T. Rowe Price (TROW) – the leading growth stock mutual fund manager – mutual funds making TROW the perfect vehicle to play a stock market rally.
TROW is off 50% from its highs seven months ago – the most of the large, publicly traded mutual fund companies – and now represents great value. TROW earned $12.75 in 2021 and while that will come down substantially this year, I still estimate $10/share. At $106.68 (Friday’s closing price), that’s less than 11x current year earnings – a bargain for this legendary mutual fund shop.
While completely contrarian and out of favor at the moment, a stock market rally could be just around the corner. If so, TROW – with its focus on growth stocks – is the perfect vehicle to play investors renewed appetite for stocks.