T. Rowe Price US Blue Chip Eq Ad USD |
by Adam Sabban
The T. Rowe Price Blue-Chip Growth strategy—which includes the exchange-traded fund, separate account, offshore vehicles, and U.S. mutual fund—earns Morningstar Medalist Ratings of Silver or Bronze (depending on share-class fees) because of the strength of its vast team and a sensible framework guided by deep research. After a difficult 2022, this retooled strategy is rounding back into shape. Paul Greene has sailed through rocky waters early in his managerial career, and though he isn't pivoting the direction of his $100 billion boat, there are some modifications on deck. Greene plans to keep a narrower band on the portfolio’s exposure to high-growth stocks, which, when described quantitatively through factor analysis, typically ran above most peers and the Russell 1000 Growth benchmark before and during Greene's tenure. The market's sudden pivot in 2022 gave him a greater appreciation for steadier growth companies that may not offer the highest absolute upside but can still deliver a good risk-adjusted return. Greene has increased weightings in stocks such as insurer Chubb CB and T-Mobile TMUS to give the portfolio more ballast during times when tech and consumer stocks (which represent the bulk of the portfolio) come under pressure. Still, Greene aims to focus the portfolio on his highest-conviction long-term growth ideas, and he won't make big compromises just to avoid volatility. The T. Rowe research platform had an uncharacteristically poor stock-picking year in 2022, but green shoots are emerging in 2023. From the start of the year through May 31, the mutual fund's no-load share class returned 27.1%, landing in the top decile of large-growth Morningstar Category peers. A roaring start to the year for mega-cap growth stocks at the top of the portfolio deserves much of the credit. Many of the stocks that did so poorly in 2022 have been key contributors so far this year, including Amazon.com AMZN, Nvidia NVDA, and Meta Platforms META. The 2021 shift to nondiversified status for some vehicles was a positive development that gave Greene greater freedom to express his bets regardless of how concentrated the benchmark became. The performance through 2023 would likely have been different had Greene not had that flexibility. This strategy still has a higher-quality array of people and process inputs than its average peer. While it likely won’t be a defensive fund, a rebound in stock selection and portfolio modifications may lead to a smoother ride than before. |
Morningstar Pillars | |
People | Above Average |
Parent | High |
Process | Above Average |
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