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SICAV

US Large-Cap Value Equity Fund

Invest in large US companies with hidden value and potential overlooked by the market majority.

ISIN LU0133100338 Valoren 1274365

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

9.02%
$774.3m

1YR Return
(View Total Returns)

Manager Tenure

8.93%
17yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.02
3.69%

Inception Date 27-Mar-2002

Performance figures calculated in USD

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31-Oct-2019 - Heather McPherson, Portfolio Manager,
We recognise that, late in the business cycle, U.S. equity valuations are elevated. In particular, investors have moved towards defensive areas of the market, making it harder to find attractive entry points in many sectors. Additionally, despite renewed U.S.-China trade optimism, lingering geopolitical uncertainties continue to disproportionately affect certain assets. Amid this challenging backdrop, we remain committed to finding companies with strong fundamentals and compelling risk/reward profiles that have been discounted due to idiosyncratic challenges.
John D.  Linehan
John D. Linehan, Co-Portfolio Manager

John D. Linehan is the portfolio manager for the Equity Income Strategy and co-portfolio manager of the US Large-Cap Value Strategy. In addition, he is the chief investment officer of Equity and a member of the firm's U.S. Equity Steering and Equity Brokerage and Trading Control Committees. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Click for Manager Outlook
 

Strategy

Manager's Outlook

U.S. economic data remain largely positive, as consumers continue to benefit from record-low unemployment and rising wages. However, we are mindful of the threat posed by the protracted U.S.-China trade war, which has hampered global growth, suppressed U.S. corporate earnings, and undermined business confidence.

We recognize that, late in the business cycle, valuations in the U.S. equity space are elevated. In particular, investors have shown a preference for more defensive areas of the market, making it harder to find attractive entry points in several sectors. We are also aware that geopolitical turbulence continues to disproportionately impact certain assets.

Given these challenging market conditions, we continue to seek out companies with strong fundamentals and compelling risk/reward profiles that have been discounted due to idiosyncratic challenges. As always, we seek to look past the geopolitical noise to make long-term investments in higher-quality companies and maintain our positions until the expected catalysts for share price appreciation come to fruition.

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a diversified portfolio of stocks from large capitalization companies in the United States that are selling at discounted valuations relative to their historical average and/or the average of their industries.

Investment Approach

  • Focus on relative value relationships to opportunistically identify attractively valued companies.
  • Fundamental research is key to uncovering companies with potential for stock price mean reversion.
  • Integrate qualitative inputs to assess potential for improved investor perception.
  • Verify relative valuation anomalies through quantitative analysis.
  • Balance valuation analysis and qualitative overlay.

Portfolio Construction

  • Typically 70-80 stock portfolio
  • Individual positions typically are below 3%, but higher conviction ideas can range to 5%
  • Sector weights will typically vary from 0.5X to 2.0X of primary value sectors of the Russell 1000 Value Index
  • Reserves will range from 0% to 2%

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 8.93% 9.02% 6.73% 10.65%
Indicative Benchmark % 10.35% 9.69% 6.82% 11.15%
Excess Return % -1.42% -0.67% -0.09% -0.50%

Inception Date 27-Mar-2002

Indicative Benchmark: Russell 1000 Value Net 30% Index

Data as of  31-Oct-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 3.37% 8.78% 6.98% 10.70%
Indicative Benchmark % 3.19% 8.62% 7.00% 10.65%
Excess Return % 0.18% 0.16% -0.02% 0.05%

Inception Date 27-Mar-2002

Indicative Benchmark: Russell 1000 Value Net 30% Index

Data as of  30-Sep-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 15-Nov-2019 Quarter to DateData as of 15-Nov-2019 Year to DateData as of 15-Nov-2019 1 MonthData as of 31-Oct-2019 3 MonthsData as of 31-Oct-2019
Fund % 3.48% 3.48% 22.29% 0.00% 0.25%
Indicative Benchmark % 2.70% 4.08% 21.91% 1.35% 1.73%
Excess Return % 0.78% -0.60% 0.38% -1.35% -1.48%

Inception Date 27-Mar-2002

Indicative Benchmark: Russell 1000 Value Net 30% Index

Indicative Benchmark: Russell 1000 Value Net 30% Index

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 June 2019, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly.

31-Oct-2019 - Heather McPherson, Portfolio Manager,
Major U.S. stock indices recorded solid gains in October, with some reaching new all-time highs in the final days of the month. Fears of a slowdown in the U.S. economy weighed on stocks at the start of the month on the back of data that showed U.S. manufacturing activity had fallen further into contraction territory. Stocks bounced back, however, after recession fears were calmed by a positive monthly payrolls report. Signs of a cooling in U.S.-China trade tensions also appeared to help the market regain momentum. Within the portfolio, the consumer staples sector had the most negative impact due to stock selection. Tyson Foods suffered due to seasonal weakness in U.S. chicken prices. Investors also remained concerned about the company’s idiosyncratic production issues. Stock choices in the health care sector, particularly Hologic, also hindered relative results. Conversely, the consumer discretionary sector was the leading contributor to relative returns due to stock selection and an underweight allocation. Shares of Las Vegas Sands rose as the company reported strong mass-market gaming revenue growth, which offset a soft VIP market. Management also indicated that the company has been only moderately affected by the recent Hong Kong protests. The real estate sector provided further support to relative performance due to stock choices, particularly Weyerhaeuser, although a detrimental overweight position tempered gains.

Holdings

Total
Holdings
84
Largest Holding Wells Fargo 3.70% Was (30-Jun-2019) 3.35%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 27.11% View Top 10 Holdings Monthly data as of 31-Oct-2019

Largest Top Contributor^

Wells Fargo
By 0.27%
% of fund 3.73%

Largest Top Detractor^

Total
By -0.56%
% of fund 2.53%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Edison International (N)
0.86%
Was (30-Jun-2019) 0.00%

Top Sale

Merck
0.58%
Was (30-Jun-2019) 1.47%

Quarterly Data as of 30-Sep-2019

30-Sep-2019 - Heather McPherson, Portfolio Manager,

During the period, we bought shares of high-quality names that we believe feature attractive risk/reward profiles. We also identified opportunities to sell shares of certain companies in light of recent stock price appreciation.

Health Care

We have a diversified view of the sector, considering the myriad challenges and opportunities health care companies face, including the potential for drug-pricing reform and a single-payer health care system, mergers and acquisitions, and an aging U.S. population. We sold shares of several names during the period.

  • We sold shares of pharmaceutical company Merck. Although we like the company for its durable growth profile and innovative product portfolio, we believe the stock's valuations are elevated given the mounting competitive pressures and political headwinds for pharmaceutical companies.
  • We bought shares of biopharmaceutical company AbbVie in the wake of its announced acquisition of Allergan, a deal that we believe provides the company with several new durable revenue streams. We have faith in AbbVie's experienced management team, and we used the market's negative reaction to the deal as a buying opportunity.

Information Technology

We generally view the information technology sector as cyclical, with many companies operating at different stages within their industry's specific cycle. Within the sector, we favor holdings in the semiconductors and semiconductor equipment industry, which we believe should benefit from the continued proliferation of internet-connected devices.

  • We sold shares of Microsoft on strength, as the company's impressive results over recent periods have driven notable stock price appreciation. However, we remain confident in Microsoft's durable growth prospects amid rising demand for cloud-based services. We also like the company's commitment to returning cash to shareholders.

Utilities

The utilities sector contains a number of companies that deliver durable cash flows and higher dividend yields with relatively modest downside risk. We prefer to invest in a combination of regulated utilities and integrated utilities that offer stable cash flows from the regulated portion of their business and earnings growth potential from the deregulated portion. We bought shares of several companies during the quarter.

  • We bought shares of Edison International following the passage of a California bill designed to compensate the victims of recent wildfires. We believe that increased visibility regarding wildfire liabilities improves Edison International's risk/reward profile. We are also attracted to the company's compelling valuation relative to peers.
  • We bought shares of CenterPoint Energy. We believe the utility is undervalued given its high-quality assets, its attractive rate base growth prospects, and the potential for merger synergies stemming from its recent acquisition of Vectren. We also feel improved communication regarding earnings expectations could lead to share price appreciation.
  • We sold shares of Duke Energy on strength in favor of other quality names within the sector. The company, along with other utilities, continued to trade higher amid falling long-term Treasury yields. We are wary of Duke Energy's elevated debt load and ongoing legal troubles regarding its Atlantic Coast Pipeline. We also believe the stock's risk/reward profile has degraded in the wake of share price appreciation.

Communication Services

The communication services sector contains several types of companies, including media and entertainment businesses and telecommunication services names. We sold shares of select sector names on strength. Within the diversified telecommunication services industry, we generally prefer high-quality companies that have solid balance sheets, stable cash flow growth, and high dividend payout ratios.

  • We sold shares of AT&T on strength. Shares performed well amid improved results from the company's business wireline segment. Investors also reacted positively to news of activist activity in the stock, which they hope could prompt management to sell off AT&T's non-core assets. However, we are concerned about the increasingly competitive U.S. mobile carrier landscape. Additionally, we are not confident that activist involvement will materially improve AT&T's risk/reward profile.

Sectors

Total
Sectors
11
Largest Sector Financials 23.29% Was (30-Sep-2019) 22.78%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2019

Indicative Benchmark: Russell 1000 Value Index

Top Contributor^

Health Care
Net Contribution 0.63%
Sector
-0.06%
Selection 0.70%

Top Detractor^

Real Estate
Net Contribution -0.26%
Sector
-0.21%
Selection
-0.04%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Information Technology
By3.77%
Fund 9.89%
Indicative Benchmark 6.12%

Largest Underweight

Consumer Discretionary
By-3.44%
Fund 2.56%
Indicative Benchmark 6.00%

Monthly Data as of 31-Oct-2019

31-Oct-2019 - Heather McPherson, Portfolio Manager,
We have a varied view of the health care sector, considering the myriad challenges and opportunities that health care companies face. This includes the potential for drug-pricing reform and a single-payer health care system, mergers and acquisitions, and an aging U.S. population. In October, we bought shares of certain companies trading at attractive levels due to negative investor perception. We also sold shares of select firms in light of recent stock price appreciation.

Team (As of 31-Aug-2019)

John D.  Linehan

John D. Linehan is the portfolio manager for the Equity Income Strategy and co-portfolio manager of the US Large-Cap Value Strategy. In addition, he is the chief investment officer of Equity and a member of the firm's U.S. Equity Steering and Equity Brokerage and Trading Control Committees. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Mr. Linehan has 30 years of investment experience, 21 of which have been at T. Rowe Price. From February 2009 to June 2014, Mr. Linehan was head of U.S. Equity and chairman of the U.S. Equity Steering Committee. From April 2003 to December 2009, he was the portfolio manager of the US Value Strategy. He started at the firm in 1998 as an equity analyst, covering the paper and forest products and airline industries. Prior to joining T. Rowe Price, between 1990 and 1996, he was an executive in the oil trading and consulting industry, first as vice president and managing director for Delaney Petroleum, then as vice president and managing director for E.T. Petroleum. Mr. Linehan began his investment career in 1987 at Bankers Trust NY Corporation, where he was an associate in mortgage-backed securities trading.

Mr. Linehan earned a B.A. in economics from Amherst College and an M.B.A. from Stanford Graduate School of Business, where he was a Henry Ford II Scholar, an Arjay Miller Scholar, and the winner of the Alexander A. Robichek Award in finance. Mr. Linehan also has earned the Chartered Financial Analyst designation.

  • Fund manager
    since
    2002
  • Years at
    T. Rowe Price
    21
  • Years investment
    experience
    30
Mark S.  Finn

Mark Finn is the portfolio manager of the US Value Equity Strategy and is also co-portfolio manager of the US Large-Cap Value Equity Strategy. Mr. Finn is a vice president of T. Rowe Price Group, Inc.

Mr. Finn has 21 years of investment experience, all of which have been with T. Rowe Price. From 2005 to 2009, Mr. Finn was an equity research analyst specializing in electric power generation, utilities, and coal. Prior to this, he was an analyst in T. Rowe Price's Fixed Income Division, where he also covered utilities and power generation. From 1998 to 2001, Mr. Finn worked with the T. Rowe Price Recovery Strategy team, where he evaluated financially distressed companies. Mr. Finn began his career with T. Rowe Price in 1990 in the Finance Division, where he served as controller of T. Rowe Price Investment Services, Inc., and as the principal accounting officer for the T. Rowe Price realty income strategies. Prior to joining the firm, he had five years of auditing experience with Price Waterhouse LLP, where he worked on engagements for both public and private companies.

Mr. Finn earned a B.S. from the University of Delaware and has earned the Chartered Financial Analyst designation. He is also a certified public accountant.

  • Fund manager
    since
    2010
  • Years at
    T. Rowe Price
    28
  • Years investment
    experience
    21
Heather K. McPherson

Heather McPherson is the co-portfolio manager for the US Large-Cap Value Equity Strategy and an associate portfolio manager of the Equity Income Strategy in the U.S. Equity Division of T. Rowe Price. Ms. McPherson is also a vice president and Investment Advisory Committee member of the Equity Income, Growth & Income, Global Technology, Large-Cap Core, New Era, Mid-Cap Value, and Value Strategies. Ms. McPherson is a member of the firm's U.S. Equity Steering Committee. She is a vice president of T. Rowe Price Group, Inc.

Ms. McPherson has 19 years of investment experience, 17 of which have been with T. Rowe Price. Prior to joining the firm in 2002, she worked as a summer intern in 2001 at Salomon Smith Barney, covering the storage area networking industry. Prior to this, she was a vice president of finance and administration for Putnam Lovell Securities, Inc.

Ms. McPherson earned a B.S. in managerial economics from the University of California-Davis and an M.B.A. from Duke University, The Fuqua School of Business.

  • Fund manager
    since
    2015
  • Years at
    T. Rowe Price
    17
  • Years investment
    experience
    19
William D. Nolan

William D. Nolan is a portfolio specialist in the U.S. Equity Division of T. Rowe Price. He acts as a proxy for equity portfolio managers with institutional clients, consultants, and prospects. Mr. Nolan supports T. Rowe Price's large-cap value strategies, focusing on the US Large-Cap Equity Income and US Value Equity Strategies. He is a vice president of T. Rowe Price Associates, Inc.

Mr. Nolan has 26 years of investment experience. Before joining the firm, he was most recently a managing director of institutional equity sales for Wachovia Corporation where he also served as director of institutional research marketing. Prior to this, Mr. Nolan was director of equity institutional sales for Alex Brown and was the Washington, D.C., branch manager in the National Accounts Division of IBM.

Mr. Nolan earned a B.S. in social and behavioral sciences from Johns Hopkins University.

  • Years at
    T. Rowe Price
    10
  • Years investment
    experience
    28
Eric Papesh

Eric Papesh is a portfolio specialist in the U.S. Equity Division of T. Rowe Price. He is based in London and serves as a proxy for equity portfolio managers with institutional clients, consultants and prospects. Mr. Papesh supports T. Rowe Price's US Smaller Companies Equity and US Large-Cap Equity Strategies offered in the Europe, Middle East and Africa (EMEA) and Asia-Pacific (APAC) regions. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Papesh has 22 years of financial services experience, two of which have been with T. Rowe Price. Before joining the firm in 2014, he was a senior research analyst with Russell Investments, where he focused on US equity investment strategies.

Mr. Papesh earned a B.A. in business administration and an M.B.A. from the University of Washington. He has also earned the Chartered Financial Analyst designation.

  • Years at
    T. Rowe Price
    5
  • Years investment
    experience
    25

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $15,000 $100 $100 5.00% 150 basis points 1.61%
Class I $2,500,000 $100,000 $0 0.00% 65 basis points 0.70%
Class J $10,000,000 $0 $0 0.00% 0 basis points 0.03%
Class Q $15,000 $100 $100 0.00% 65 basis points 0.77%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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