The 30-years-running T. Rowe Price Equity Income Fund experienced its first two months under a new leader, John Linehan, in the fourth quarter, who took over from long-time manager Brian Rogers on Nov. 1.
Linehan joined T. Rowe Price International in 1998, and previously acted as portfolio manager of the Value Fund from 2003 to 2009, when he became head of the firm’s U.S. equity. Linehan has also worked on the Institutional Large-Cap Value Fund and on the Investment Advisory Committee of the Equity Income Fund. The company describes him as having “deep expertise in value investing.”
Guru Brian Rogers will remain as the chairman of the board and chief investment officer of T. Rowe Price Group and as chairman of the Investment Advisory Committee of the Equity Income Fund, among other roles.
During the fourth quarter, management added 16 new stocks to the fund, for a total 113 in the portfolio valued at $22.2 billion. The fund is 23.3% invested in financial services stocks, followed by Industrials at 12.9% and Technology at 11.8%.
Linehan has not yet released his fourth quarter shareholder letter, but in his outlook at the end of the third quarter said he remained cautious.
“We expect modest returns in the U.S. stock market as the impact of weak oil prices and a strong dollar continue to weigh on S&P 500 earnings,” he wrote. “Prices in many areas of the market are reasonable, however, and the quarter's decline has opened up opportunities to buy quality companies that we believe were indiscriminately sold off.”
He also appeared to carry Rogers’ torch regarding the characteristics he sought for stocks he would buy for the fund: high-quality, good management, strong competitive and financial positions, and attractive value traits.
The largest stocks the T. Rowe Price managers purchased during the reign change of the fourth quarter were: Morgan Stanley (MS, Financial), Citigroup Inc. (C, Financial), Anthem Inc. (ANTM, Financial), Ameriprise Financial Inc. (AMP, Financial) and Pentair Plc (PNR, Financial).
Morgan Stanley (MS, Financial)
The fund purchased 9.82 million shares of Morgan Stanley, giving it a 1.41% portfolio weight. Morgan Stanley’s fourth quarter share price averaged $33.
Morgan Stanley was originally incorporated under the laws of the State of Delaware in 1981. Morgan Stanley has a market cap of $50.28 billion; its shares were traded at around $25.97 with a P/E ratio of 15.29 and P/S ratio of 1.45. The dividend yield of Morgan Stanley stocks is 2.13%.
The fund purchased 5.04 million shares of Citigroup Inc., a 1.17% portfolio weighting. Citigroup’s fourth quarter share price averaged $53.
Citigroup Inc. was incorporated in 1988 under the laws of the State of Delaware. Citigroup Inc. has a market cap of $126.93 billion; its shares were traded at around $42.61 with a P/E ratio of 9.27 and P/S ratio of 1.71. The dividend yield of Citigroup Inc. stocks is 0.37%.
The fund purchased 1,772,382 shares of Anthem Inc., a 1.11% portfolio weight. Anthem’s fourth quarter share price averaged $138.
Anthem Inc., formerly WellPoint Inc. is an Indiana corporation incorporated on July 17, 2001. Anthem Inc. has a market cap of $35.4 billion; its shares were traded at around $135.59 with a P/E ratio of 12.77 and P/S ratio of 0.48. The dividend yield of Anthem Inc. stocks is 1.85%. Anthem Inc. had an annual average earnings growth of 12.6% over the past 10 years. GuruFocus rated Anthem Inc. the business predictability rank of 4-star.
Ameriprise Financial Inc. (AMP, Financial)
The fund purchased 1.77 million shares, a 0.85% portfolio weight. Ameriprise’s fourth quarter share price averaged $112.
Ameriprise Financial Inc. was formed in 1983 as a Delaware corporation in connection with American Express Company's 1984 acquisition of IDS Financial Services from Alleghany Corporation. Ameriprise Financial Inc. has a market cap of $16.18 billion; its shares were traded at around $92.92 with a P/E ratio of 10.03 and P/S ratio of 1.41. The dividend yield of Ameriprise Financial Inc. stocks is 2.79%. Ameriprise Financial Inc. had an annual average earnings growth of 23.7% over the past five years.
The fund purchased 3.62 million shares of Pentair Plc, a 0.81% portfolio weight. Pentair’s fourth quarter share price averaged $54.
Pentair PLC was incorporated on Nov. 28, 2013. It is a diversified industrial manufacturing company comprised of four operating segments: Valves & Controls, Process Technologies, Flow Technologies and Technical Solutions. Pentair Plc has a market cap of $7.22 billion; its shares were traded at around $45.00 with a P/E ratio of 16.23 and P/S ratio of 1.26. The dividend yield of Pentair Plc stocks is 2.84%. Pentair Plc had an annual average earnings growth of 4.5% over the past five years.
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