Steady TROW Is a Star Performer

Martin Zweig is a guru among Wall Street's gurus. With a Ph.D. in finance and an enviable track record, he has decades of history that proves he knows how to pick stocks.

So, of course, when I was creating the automated strategies based on the thinking of Wall Street's best that I use to pick stocks for my Web site -- Validea.com -- I included Zweig. I haven't been sorry. The strategy I base on his writing is, at this time, the best-performing of all the strategies I use. In more than four years since I have followed this Zweig strategy, it has gone up 160.7%. That's impressive when considering the S&P 500 has risen less than a third as much, with a gain of 44.5% over the same period.

Because of the Zweig's strategy's stellar performance, I wanted to report on a company the strategy currently favors very strongly. It is one of the most respected mutual fund companies around -- T. Rowe Price (TROW - commentary - Cramer's Take). Conservative and consistent, Price has earned a reputation as a solid leader in its market. Morningstar, which has followed the mutual fund industry for years, says about Price's mutual funds, the heart of the company: "T. Rowe has posted very strong investment performance, with its fund performance well above the industry average as measured by Morningstar's overall star rating."

What is it about Price that the Zweig strategy finds so enticing? For one thing, its P/E ratio is 26.94, which fits well within the 5-to-43 range the strategy looks for. It also wants quarterly sales growth to be rising, which holds true for Price.

Next, the Zweig strategy looks at earnings from several angles. It wants current earnings to be positive, EPS for the year-ago quarter to be positive, the growth rate of the current quarter's earnings to be positive when compared to the same quarter a year ago, and the earnings growth rate for the past several quarters to be growing and positive. Price meets all of these criteria.

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At the time of publication, Reese was long T. Rowe Price, although holdings can change at any time.

John P. Reese is founder and CEO of Validea.com, an investment research firm, and Validea Capital Management, an asset management firm serving affluent investors and companies. He is also co-author of the best-selling book, The Market Gurus: Stock Investing Strategies You Can Use From Wall Street's Best. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Reese appreciates your feedback. Click here to send him an email.

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