T. Rowe Price US Large Cap Growth Equity fund seeks to invest in large US firms that demonstrate innovation and change. Experienced manager Taymour Tamaddon collaborates with the T. Rowe Price analyst team to find these names, the best of which he will back with strong conviction. Taymour’s past experience has given him excellent insight and access to some of the world’s leading companies.
Our opinion
T. Rowe Price’s vast analyst resource offers its funds an edge even in this competitive, highly-analysed market. Taymour’s experience, as well as his desire to get ‘hands on’ in collaboration with the analysts, is also commendable. We like that the fund also has a different approach to risk management: it has a very high conviction in the top ten, with the remaining 50% of the portfolio invested in some 50+ names to balance risk and reward.
Company description
Founded in 1937, T. Rowe Price is one of the world's largest investment managers and was awarded the Elite Provider for Equities Rating each year from 2016 to 2021. Fundamental research is at the heart of the T. Rowe Price approach, with more than 200 in-house analysts dedicated to equity and fixed income research. Experienced and stable fund management teams are a key feature of the firm.
Fund manager
Taymour Tamaddon started his T. Rowe Price career in 2004 in the US equities department. Prior to this, he worked as a consultant specialising in the energy industry and, more relevantly, at Amazon in the finance and merchandising department which involved interaction with Jeff Bezos. He has a degree in applied physics from Cornell University and an MBA from Dartmouth College. He also holds the CFA designation. At T. Rowe Price, he is a vice president and member of the Investment Advisory Committees for a wide range of US mandates, giving him great exposure, as well as giving input to some global and health sciences mandates.
The US equity market is largely efficient (!) so we need to embrace uncertainty and use research to identify likely beneficiaries of disruption that have the best management teams with the most profitable future business models.
Taymour TamaddonFund manager
Investment process
T. Rowe Price US Large Cap Growth Equity is one of the more concentrated portfolios at T. Rowe Price. Taymour looks for companies that can generate above average growth for the next three to five years, determined by how much free cash flow they can produce. He believes that most large cap growth companies revert to the mean over time, so wants to capture outperformance in that period. He is happy to have a small part of the portfolio in firms exhibiting lower but sustainable growth.
Taymour can choose from a universe of approximately 500 companies. This universe is first analysed with a screen, which looks for a minimum of 10% + inflation earnings growth. Taymour admits this is a high benchmark and whittles the list down to around 150-200 companies.
From here, T. Rowe Price’s analyst team do their proprietary fundamental analysis. This will involve going through the stock’s financial reports to confirm the screens have interpreted the company’s numbers correctly and looking for where the company is performing and whether it is able to grow into the future. T. Rowe Price has an enviable resource of equity specialists to help produce this work.
Taymour will then stress tests the stock’s investment thesis to confirm the analysts’ expectations. He does this in partnership with the analyst, making sure he has done the work on the stock too, not simply picked their best ideas. Work is conducted on ESG inputs at this stage too. There will then be a valuation analysis to assess the estimation of what is a good price for the stock. This leaves around 80-100 companies that are worthy of consideration.
The final portfolio will consist of around 60-75 companies that have been selected based on which make for the most compelling opportunities over a three-year period, as well as the risk they offer. The top ten stocks will be high conviction and account for around 50% of the portfolio. A more even spread and smaller weightings across the remaining 50+ stocks helps with risk management through diversification, without sacrificing potential rewards.
ESG
ESG - Integrated
For Taymour and his team, ESG factors are one component of the investment decision, meaning that they are not the sole driver of an investment decision, nor are they considered separately from more traditional analysis. Rather, they enhance investment decisions. In order to systematically evaluate ESG factors, the investment team follows a three-step process - identification, analysis and integration. It will initially use ESG screening tools (including a proprietary ESG scoring model, Responsible Investing Indicator Model (RIIM)) to identify companies with ESG issues. T. Rowe’s team of dedicated ESG specialists will then apply further analysis to companies flagged by the screening process, which can include engagement initiatives and proxy voting recommendations.
The process allows Taymor to understand any ESG risks present in the portfolio and to integrate the analysis into his investment strategy. The main ESG focuses are Responsible Investing (RI) and Governance.
Risk
Alongside the risk assessment inherit in fundamental analysis, the manager has a ±5% relative position limit to the Russell 1000 Growth index. There are sector limits too: Taymour cannot have less than half the benchmark weight of a sector, nor more than three times its weight. He also can’t buy anything the small and medium-sized funds team own. The fund has done well in a variety of markets but has underperformed when value stocks have outperformed.
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