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SICAV

US Smaller Companies Equity Fund

Seeks capital appreciation using both value and growth approaches.

ISIN LU0133096981 Valoren 1274355

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

15.34%
$1.6b

1YR Return
(View Total Returns)

Manager Tenure

37.55%
<1yr

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.84
3.83%

Inception Date 28-Sep-2001

Performance figures calculated in USD

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31-Dec-2019 - Curt Organt, Portfolio Manager ,
We seek to capitalise on opportunities across the broad range of the small- and mid-cap U.S. equity market. Overall, we remain modestly overweight high-quality companies that compound their earnings. We also look for select investments in “deeper-value” opportunities – those stocks that we believe are significantly undervalued – and hold a number of income-oriented dividend growth companies.
Curt J. Organt, CFA
Curt J. Organt, CFA, Portfolio Manager

Curt Organt is the portfolio manager of the US Smaller Companies Equity Strategy and the associate portfolio manager of the US Small-Cap Core Equity Strategy in the U.S. Equity Division of T. Rowe Price. Mr. Organt is a vice president and an Investment Advisory Committee member of the Small-Cap Stock, Small-Cap Value, Global Industrials Equity, New Horizons, and US Small-Cap Growth II Equity  Strategies. He is a vice president of T. Rowe Price Group, Inc.

 

Strategy

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 widely diversified portfolio of stocks from smaller capitalization companies in the United States.

Investment Approach

  • Focus on companies within the market cap range of the Russell 2500 Index at time of purchase.
  • Assess valuation using relevant sector/industry metrics — absolute and relative price to earnings, price to cash flow, and price to assets.
  • Integrate fundamental research by a dedicated Small-Cap research team to discover underfollowed companies possessing clear business plans, financial flexibility, and proven management teams.
  • Identification of a “value creation” catalyst is key.
  • Broadly diversify holdings to manage portfolio risk profile.
  • Employ a low turnover and patient trading strategy to promote full value realization.

Portfolio Construction

  • 200-250 securities
  • Position sizes typically range from 0.15% to 2.50%
  • Primary sector weights generally vary from 0.5X to 2.0X the Russell 2500 Index weights

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Fund % 37.55% 15.34% 11.67% 14.91% 15.51%
Indicative Benchmark % 27.16% 9.84% 8.44% 12.10% 9.92%
Excess Return % 10.39% 5.50% 3.23% 2.81% 5.59%

Inception Date 28-Sep-2001

Manager Inception Date 31-Mar-2019

Indicative Benchmark: Russell 2500 Net 30% Index

Data as of  31-Dec-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 37.55% 15.34% 11.67% 14.91%
Indicative Benchmark % 27.16% 9.84% 8.44% 12.10%
Excess Return % 10.39% 5.50% 3.23% 2.81%

Inception Date 28-Sep-2001

Indicative Benchmark: Russell 2500 Net 30% Index

Data as of  31-Dec-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 16-Jan-2020 Quarter to DateData as of 16-Jan-2020 Year to DateData as of 16-Jan-2020 1 MonthData as of 31-Dec-2019 3 MonthsData as of 31-Dec-2019
Fund % 3.19% 3.19% 3.19% 1.47% 7.11%
Indicative Benchmark % 2.34% 2.34% 2.34% 2.06% 8.40%
Excess Return % 0.85% 0.85% 0.85% -0.59% -1.29%

Inception Date 28-Sep-2001

Indicative Benchmark: Russell 2500 Net 30% Index

Indicative Benchmark: Russell 2500 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-Dec-2019 - Curt Organt, Portfolio Manager ,
U.S. stocks advanced in December, capping a robust year, with most major indices reaching new all-time highs. U.S.-China trade negotiations continued to influence investor sentiment and the announcement that both sides had reached a verbal agreement on a much anticipated “phase one” trade deal lifted share prices. At the portfolio level, our underweight position in energy, the best-performing sector in the benchmark, had the most negative impact on relative results. Stock selection in consumer discretionary also hindered performance. Shares of Aaron’s, the U.S. leader in rent-to-own retail services, declined after it missed revenue and earnings’ expectations, as accelerating traffic in core stores pulled manpower from the servicing of collections. We believe this is a small hiccup in an ongoing transition toward an improved business mix. Conversely, health care contributed the most to relative returns due to stock choices. Shares of Kodiak Sciences, a clinical stage retinal disease biotech company, jumped on the announcement that it had secured an attractive royalty rights deal for its KSI-301 drug, removing a significant financing overhang. KSI-301 is an anti-VEGF treatment for retinal diseases and has shown signs of efficacy durability that exceeds that of commercially available drugs.

Holdings

Total
Holdings
176
Largest Holding CoStar Group 2.07% Was (30-Sep-2019) 2.23%
Other View Full Holdings Quarterly data as of 31-Dec-2019
Top 10 Holdings 14.92% View Top 10 Holdings Monthly data as of 31-Dec-2019

Largest Top Contributor^

Avery Dennison
By 0.26%
% of fund 1.49%

Largest Top Detractor^

Vulcan Materials
By -0.11%
% of fund 1.29%

^Absolute

Quarterly Data as of 31-Dec-2019

Top Purchase

E*TRADE Financial (N)
0.45%
Was (30-Sep-2019) 0.00%

Top Sale

JBG SMITH Properties
1.28%
Was (30-Sep-2019) 1.91%

Quarterly Data as of 31-Dec-2019

30-Sep-2019 - Curt Organt, Portfolio Manager ,

We do not make sector "bets," and sector weightings are formed as a residual of our bottom-up investment process. During the quarter, trading activity spanned the various sectors. We've highlighted some of the larger purchases and sales occurring within the information technology, industrials and business services, consumer discretionary, and consumer staples sectors.

Information Technology

Our information technology allocation is now significantly overweight relative to the benchmark, as a number of the disruptive companies that are on the right side of change are featured in the sector. We remain sanguine on the sector as a whole. We have large allocations in the software, semiconductors, IT services, and electronic equipment and instruments segments. We have been able to find many niche software providers that we believe have attractive growth opportunities and barriers to ward off their competition.

  • We took profits in Keysight Technologies, which makes electronics test and measurement equipment, following strong performance as quarterly results exceeded a consensus view tempered by concerns regarding headwinds from the Huawei ban. We continue to value Keysight for its exposure to 5G, but believe the risk/reward potential has moderated at current valuation levels.
  • Gartner sells proprietary, subscription-based market research to vendors, manufacturers, purchasers, and investors of technology. We believe this to be a high-quality, durable business exposed to favorable industry trends and run by a quality management team. However, additional investments in its slower-growing global business sales segment are expected to weigh on near-term earnings, so we elected to exit our position at this time.

Industrials and Business Services

In the industrials and business services sector, the portfolio is overweight compared with the benchmark allocation due in particular to sizable positions in machinery, aerospace and defense, and professional services. The sector tends to be cyclical, with strong surges during economic recovery. We have exposure to cyclical holdings to take advantage of economic recovery, but we also hold positions in more stalwart areas that allow steady and measured returns to provide a more balanced risk exposure.

  • We added a position in Clarivate Analytics, a set of information services assets in the patent services, trademarks, and education industries. We have confidence in CEO Jerre Stead's ability to utilize his successful data services experience to unlock the potential of the company's data through improved monetization.
  • We initiated a position in UniFirst, a uniform rental and facility services company that is well positioned as the number three player in an industry with high barriers to scale. We believe the investments new CEO Steven Sintros is making in the company's teams and technology will accelerate organic uniform revenue growth and expand margins.
  • We pared Teledyne Technologies and took profits following strong performance.

Consumer Discretionary

We are underweight the benchmark allocation within the consumer discretionary sector, where our largest allocations are to the specialty retail; hotels, restaurants, and leisure; and diversified consumer services industries. Despite our underweight, we continue to believe the sector is ripe with select names that provide attractive business models and insulated growth opportunities.

  • We found a compelling entry point in Ollie's Bargain Outlet. The company operates in the attractive closeout retail industry, has a strong customer value proposition, and has a long runway for unit growth.
  • Shares of Burlington Stores, the third-largest off-price retailer in the U.S., spiked on second-quarter results that significantly exceeded consensus expectations and we took profits. We believe the firm is in the early innings of refining its business model and is on the right side of a secular retailing trend toward off-price retailers that offer bargain-hunting opportunities for consumers.

Consumer Staples

Our allocation to the consumer staples sector is generally in line with the benchmark allocation, though our allocation here is concentrated in sizable allocations in the food products and food and staples retailing industries.

  • We initiated a position in consumer products company Edgewell Personal Care. We�believe the market originally overreacted to�the company's recent acquisition of Harry's, a direct-to-consumer razor startup, and that the combination of Harry's marketing skills and Edgewell's technology and private-label capabilities positions the company to offer best-in-class innovation and a full price ladder of niche products.
  • We increased our position in Cal-Maine Foods, the largest producer and marketer of shell eggs in the U.S. The company is a low-cost producer, prudent with its balance sheet, and well positioned to capitalize on inflection in the cycle.

Sectors

Total
Sectors
11
Largest Sector Industrials & Business Services 19.87% Was (30-Nov-2019) 19.74%
Other View complete Sector Diversification

Monthly Data as of 31-Dec-2019

Indicative Benchmark: Russell 2500 Index

Top Contributor^

Financials
Net Contribution 0.10%
Sector
0.02%
Selection 0.08%

Top Detractor^

Information Technology
Net Contribution -0.66%
Sector
0.04%
Selection
-0.70%

^Relative

Quarterly Data as of 31-Dec-2019

Largest Overweight

Industrials & Business Services
By4.83%
Fund 19.87%
Indicative Benchmark 15.04%

Largest Underweight

Real Estate
By-3.42%
Fund 6.83%
Indicative Benchmark 10.25%

Monthly Data as of 31-Dec-2019

31-Dec-2019 - Curt Organt, Portfolio Manager ,
Industrials and business services, information technology (IT), financials, and health care remain the dominating sectors in the portfolio, all with greater than 10% of the equity allocation. We continue to invest in select companies across various industries where we feel valuations may underestimate the sustainability of their growth or turnaround potential. This included boosting positions within commercial services and supplies, software, IT services, and oil, gas, and consumable fuels.

Team (As of 06-Jan-2020)

Curt J. Organt, CFA

Curt Organt is the portfolio manager of the US Smaller Companies Equity Strategy and the associate portfolio manager of the US Small-Cap Core Equity Strategy in the U.S. Equity Division of T. Rowe Price. Mr. Organt is a vice president and an Investment Advisory Committee member of the Small-Cap Stock, Small-Cap Value, Global Industrials Equity, New Horizons, and US Small-Cap Growth II Equity  Strategies. He is a vice president of T. Rowe Price Group, Inc.

Mr. Organt has 25 years of investment experience, 23 of which have been with T. Rowe Price. Prior to joining the firm in 1995, he was a financial analyst and a marketing analyst at DAP Products, Inc.

Mr. Organt earned a B.S. in finance and philosophy from La Salle University and an M.B.A. from Wake Forest University. He also has earned the Chartered Financial Analyst designation.

  • Fund manager
    since
    2019
  • Years at
    T. Rowe Price
    24
  • 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% 160 basis points 1.71%
Class I $2,500,000 $100,000 $0 0.00% 95 basis points 1.01%
Class Q $15,000 $100 $100 0.00% 95 basis points 1.10%
Class S $10,000,000 $0 $0 0.00% 0 basis points 0.10%

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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