2. T. Rowe Price (TROW) is an investment-management company, poised to benefit from a rising equity market. The company sold its first mutual fund in 1950. It is a pioneer in the market.
Flow data indicates that institutions and retail investors are embracing equities in 2011, a trend Goldman expects to continue. Consequently, asset managers will "generate significant cash to buy back stock and pay dividends." Growth in passive strategies, including ETFs, and international exposure are long-term cyclical drivers for the group. T. Rowe, with 73% of assets under management in equities, is Goldman's top pick in the industry for 2011.
T. Rowe's high-proportion of top-ranked funds positions it as a favorite of institutions and individuals. According to Goldman, T. Rowe has "one of the highest and most consistent organic growth rates in the asset management space, averaging 8% annually since 2002." It has a significant presence in the flow-stable retirement channel, giving it momentum for the first quarter, usually the firm's best for attracting retirement assets. T. Rowe's stock commands a premium, which Goldman says is "worth it." It sells for a forward P/E of 17 and a cash flow multiple of 32, notably more than the average asset management peer. It has returned 8.5% a year, on average, since 2008.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV