10 Questions With T. Rowe Price Growth Stock's Robert W. Smith

I feel comfortable that the business model is growing. I feel comfortable that the space will be more profitable. The biggest risk is probably competition with Google. They've lost a little bit in market share. I feel a little bit better about the market. This is the type of the stock that people look to for growth over the next five years, as opposed to the previous five years.

Have we missed some of the run-up from the bottom? Yes, it's up 60% from the bottom. But it's also down 90% from the top.

7. Freddie Mac(FRE Quote) is your number-three holding, and it's one you have lightened up on. Are you as concerned about the impact of Republican-controlled Congress, which is expected to be less enamored of the government-secured entities, or perhaps the slowdown in the refinancing boom? What else concerns you?

I feel less-concerned than the darn market is! (Laughs) Rodney Dangerfield had more respect than Freddie Mac has.

Here's a company that has posted 18% earnings growth over 10 years, and the multiple goes down every year. It trades at nine, 10 times next year's earnings. I don't see it getting slammed. You could argue that it's incrementally worse, and I'm sure that's creating some of the liquidations of this position.

I still think they are a solid, double-digit grower. The risk you face is that Freddie Mac has been growing above trend; so, does that mean they grow below trend -- maybe 10% for a few years? I think that's possible.

But I do think they are driven by growth of debt outstanding. Even if you don't have this huge refi boom anymore, the debt outstanding balance will be driven by housing prices. While we have pockets of housing bubble, remember, Freddie Mac can't do jumbos. So I don't think, in their space, we have a housing bubble.

So over time, if it grows low double-digits and you're paying nine, 10 times earnings.

Are you still lightening up?

No. I've stopped.

8. You traditionally sock about 10%-15% of your fund into foreign equities. According to Morningstar, you have about 7.3% in foreign stocks right now. Why the smaller stake? Is this a bigger statement about U.S. vs. foreign equities right now?

I'm at the low end of that the range; maybe 8%. It's lower than normal.