Price joins S&P index

Money manager's stock soars in trading of 18.9 million shares

`Nice to be in the club'

Securities

October 13, 1999|By Bill Atkinson | Bill Atkinson,SUN STAFF

T. Rowe Price Associates Inc.'s stock jumped nearly 6 percent and volume soared yesterday after an announcement that the Baltimore-based money manager was being added to the Standard & Poor's 500 index.

Price's stock rose $1.7812 a share to close at $31.875, and volume ballooned as 18.97 million shares were traded. At one point during the day, Price's stock was up nearly 16 percent.

"That is a big move for us, even with our volatile stock," said James S. Riepe, vice chairman of Price, the country's seventh-largest publicly traded money manager. "That volume is just extraordinary."

The surge was fueled by index fund managers who were buying the stock, Riepe said. Those funds aim to mirror the performance of the S&P 500 index, and they hold all 500 companies in their portfolios.

Standard & Poor's said Thursday evening that it would add Price to the index to replace Data General Corp. Yesterday, Data General was acquired by EMC Corp., and Price was added to the index.

The index is a closely watched measure of the stock market's performance, and many mutual fund managers use it as a benchmark to gauge their success or failure.

Although there are 500 companies, the index is dominated by Microsoft Corp., General Electric Co. and Intel Corp. Microsoft is the largest of the group with a market capitalization of $475.9 billion, and represents about 4.326 percent of the index.

Price's market capitalization at the end of trading yesterday was $3.9 billion.

"We are a little pimple on the side of the index, but it is nice to be in the club," Riepe said.

Indeed, Price has been a strong performer in the mutual fund business, despite intense competition. The industry is saturated with more than 600 mutual fund companies that sell more than 7,000 funds. A handful of those companies dominate the business, including Fidelity Investments, Janus and the Vanguard Group, which have been gobbling up market share.

But Price has done well, too. During the first half of the year, the company made a record $107.2 million, up 24.2 percent from the comparable period in 1998. The firm managed $159.2 billion for individuals and institutions as of June 30.

"Typically, Standard & Poor's doesn't just add any old company," said John A. Hall, a mutual fund analyst at Prudential Securities in New York. "You have to be typically the best of corporate America."

Hall said the addition of Price gives the S&P 500 its second asset manager. Franklin Resources Inc. was added to the index in April 1998.

David Blitzer, chief economist at Standard & Poor's, said the company is trying to identify "leading companies in leading industries."

"T. Rowe Price is an easy story to tell," he said.

Price executives didn't know that Standard & Poor's, a New York-based firm that provides financial, economic and investment information to corporations, was considering the firm as a candidate for the index.

"We saw it on the tape" yesterday evening, Riepe said. "It is really simply a recognition that the company has reached a level of accomplishment and size."

Pub Date: 10/13/99

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