INVESTING WISDOM FROM T.ROWE PRICE (FATHER OF GROWTH INVESTING)
Thomas Rowe Price Jr., known as the 'father of growth investing', believed in long-term thinking. He thought both parties benefit when businesses and customers' interests align. He emphasized treating customers well, and understanding that goodwill is crucial but fragile. In 1937, he started T. Rowe Price and Associates, opposing commission-based models he saw as unethical. Instead, he favored a fee system tied to assets under management to ensure mutual interests.
He believed the only protection was to select stocks whose earnings were growing faster than the overall economy. He said he expects to pay up for an outstanding growth prospect. He defines a company whose earnings per share reaches a new high level at the peak of each succeeding major business cycle. He gives indications of reaching new high earnings at the peak of future business cycles.
Rowe Price said that the individual investor can duplicate his record if " they select well-managed companies in fertile fields for growth and hold the stocks until it's obvious that the company is no longer growing..and then and only then, is it time to sell.
The selection process, according to Price, is clear-cut. His requirement for selecting "T.Rowe Price-type" growth companies has been printed and reprinted in scores of articles and printed interviews over the years, they are:
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1. A fertile field (industry or business) in which to operate.
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2. Superior research to develop products and markets.
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3. A lack of cutthroat competition.
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4. A comparative immunity from government regulation.
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5. Low total labor costs, but well-paid employees.
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6. The promise of a higher than average percent return on invested capital, sustained high-profit margins, and a superior growth of earnings per share.
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Armed with this list,Price notes that the successful investor must take into account the investing environmnet : the backdrop of social, polotical,as well as economic influences.
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Disclaimer: This blog is intended solely for educational purposes. The securities/investments mentioned are not recommendations. Additionally, the past performance of stocks does not guarantee future returns. We strongly advise investors to consult certified experts before making any investment decisions.
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