Patient strategy pays off for conservative investor


April 08, 1996|By Bill Atkinson

BRIAN C. ROGERS, manager of T. Rowe Price's Equity Income Fund, could well be called Mr. Conservative.

He drives a 1992 Ford Explorer, rarely gambles and keeps healthy by taking aerobics classes.

So, it's only fitting that this buttoned-down manager runs a fund that most any Bob Dole supporter would be proud to own.

"There has to be some natural affinity for the investment style one practices," Mr. Rogers said. "Basically, I would consider myself to be a really conservative investor in conservative funds."

Returns on the $6.2 billion Equity Income Fund have been anything but moderate, however.

Morningstar, the respected newsletter that follows the mutual fund industry, ranks the fund's performance over the last 10 years in the top 1 percent of 119 equity income funds.

Equity Income has returned on average 15.2 percent annually since 1985. And last year it returned 33.4 percent, beating the Lipper Equity Income Funds Average's 30.2 percent, but falling short of the S&P 500 stock index's amazing return of 37.6percent.

His strategy is investing in big companies that make dividend payments that can be sustained over time. He also likes companies whose stock price has been beaten down by bad news.

He typically holds the stocks for about three years on average, which is far longer than any of the aggressive funds, which tend jTC to buy and sell stocks at a frenetic pace. "You really do have to have some patience," he said.

A company whose stock Mr. Rogers has been buying this year is McCormick & Co., the Sparks-based producer of seasonings and specialty foods. McCormick has been trading in the $22-a-share range after falling from around $30 a share in 1992.

"We are just willing to bet the company has disappointed investors for the last couple of years," he said. "The yield is there. It seems to us management can improve their competitive postion."

Last year, he snapped up shares of Union Camp Corp., Betz Laboratories Inc. and International Paper Co. when their prices started sagging amid projections that the companies' earnings would be weak in 1996.

Mr. Rogers has been employing the "value" strategy since he began managing the fund 10 years ago. In 1991, when bank stocks were taking a beating because many of their commercial real estate loans were going bad, he bought First Interstate Bancorp., which sank to about $40 a share from the $80 a share range.

"There was just a lot of panic in the financial sector," he said. "It looked to us as if the excess risk has rung out."

Four years later, First Interstate's stock quadrupled to about $170 a share when Wells Fargo & Co. agreed to buy the Los Angeles-based banking company.

"If you buy a decent company that is really under a cloud, you can do that from time to time," Mr. Rogers said. "They don't always work that well. We hit the wall from time to time ourselves."

Mr. Rogers rammed into a wall with International Business Machines Corp. after buying the stock in the early 1990s at $105 a share.

The company was under assault by a group of smaller personal computer businesses that were selling PCs by the droves to consumers, and chewing into IBM's market share.

Mr. Rogers said he studies his blunders and victories. "Every day we do that," he said. "You really have to try to take a step back and look at the big hits and the trauma, and not get too euphoric or too demoralized over the bad ones."

Mr. Rogers' conservative bent keeps him far away from the flashy technology stocks such as Netscape Communications Corp. Their shares are too volatile for his taste. "I wouldn't touch Netscape with a 10-foot pole. God help you if anything goes wrong with the company. With a situation like McCormick, if anything goes wrong, I think the downside is only 10 percent."

"We are really a steady, plodding fund," Mr. Rogers said. "We don't try to do what a lot of other funds do, and that is shoot the lights out."

Pub Date: 4/08/96

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