4 Top T. Rowe Price Funds for Growth Investors
Growth stocks tend to enjoy high valuations because investors bet on lofty growth rates in the future. However, growth stocks can underperform their value counterparts if their realized growth rates deviate, even if slightly, from consensus numbers. The global economic slowdown, the appreciation of the U.S. dollar and the divergence of monetary policies between the United States and the rest of the world pose significant risks to growth prospects. Investors who would like to commit their funds to diversified portfolios of growth stocks have many compelling mutual funds choices offered by T. Rowe Price Group, Inc. (NASDAQ: TROW).
T. Rowe Price Diversified Small Cap Growth Fund (PRDSX)
Assets under management (AUM): $2.7 billion
2010-2015 average annual net asset value (NAV) return: 13.02%
Net expense ratio: 0.82%
The T. Rowe Price Diversified Small Cap Growth Fund is an actively managed fund that invests in U.S. small-cap growth companies with market capitalizations similar to those of companies included in the MSCI U.S. Small Cap Growth Index. The fund concentrates its portfolio on health care, information technology and consumer discretionary stocks, which account for about 65% of the fund's portfolio. The fund picks its stocks using quantitative models that incorporate both momentum and cash flows of candidate companies.
The fund has outperformed its benchmark, the MSCI U.S. Small Cap Growth Index, over the last three, five and 10 years. Low fees, strong performance and a highly experienced management team have landed the fund with a five-star overall rating and a silver analyst rating from Morningstar in the small growth category. The fund charges no load fees and requires a minimum investment of $2,500.
T. Rowe Price International Discovery Fund (PRIDX)
AUM: $4.7 billion
2010-2015 average annual NAV return: 8.05%
Net expense ratio: 1.20%
The T. Rowe Price International Discovery Fund seeks long-term growth of capital by investing in small- to medium-cap companies outside the U.S. that exhibit high growth characteristics. The fund carefully evaluates the outlook for sectors, industries, and individual countries and uses a bottom-up stocks selection process. Japan stocks have 21% allocation, while U.K. equities account for 17% of the fund's assets. The fund's returns are subject to currency risk since the majority of its holdings are denominated in foreign currencies. Other notable countries represented in the fund's portfolio include China, Germany, South
Korea and India. Consumer discretionary stocks have the largest weight with 22% allocation, while industrials and business services equities account for 18% of the fund's portfolio.
For its consistent risk-adjusted return, the fund has received a five-star overall rating and a silver analyst rating from Morningstar in the foreign small/mid growth category. The fund has no load fees and requires its investors to contribute at least $2,500.
T. Rowe Price Growth Stock Fund (PRGFX)
AUM: $45.3 billion
2010-2015 average annual NAV return: 14.61%
Net expense ratio: 0.67%
The T. Rowe Price Growth Stock Fund invests in common stocks of a diversified group of U.S. growth companies. The fund focuses on well-established growth firms with proven track records of financial performance. These companies typically come from a wide selection of industries and have sound financial standing. The fund is weighted heavily towards stocks from sectors such as information technology (30% allocation), consumer discretionary (28% allocation) and health care (21% allocation).
The fund's main manager, Rob Bartolo, resigned in 2014, and Joe Fath took over as the fund manager. Morningstar has assigned a five-star overall rating and a neutral analyst rating to the fund in the large growth category due to management changes. The fund comes with no load fees and requires a minimum contribution of $2,500 from its investors.
T. Rowe Price Diversified Mid Cap Growth Fund (PRDMX)
AUM: $576.5 million
2010-2015 average annual NAV return: 11.27%
Net expense ratio: 0.87%
The T. Rowe Price Diversified Mid Cap Growth Fund invests in a broadly diversified portfolio of common stocks of companies that have medium market capitalization and exhibit faster growth rates of earnings. Mid-cap companies are typically in the early and dynamic phases of their life cycles and can offer better growth prospects compared to their larger counterparts. However, this comes at the price of greater volatility. The fund's portfolio is well-diversified across a wide variety of sectors, with no single sector accounting for more than 20% of the fund's assets. Technology, consumer discretionary, industrials and business services stocks have the largest weights in the fund's portfolio.
The fund has been awarded a four-star overall rating from Morningstar in the mid-cap growth category. The T. Rowe Price Diversified Mid Cap Growth Fund is a no-load fund and requires investors to contribute at least $2,500.