T. Rowe Price: Growth & Income

10/31/2017 5:00 am EST

Focus: FINANCIALS

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

As more and more investors seek alternatives in a low-interest-rate environment, they are turning to managed mutual funds for both income and growth, notes Mark Skousen, editor of Five Star Trader

The mutual fund business is booming. I'm reminded of the pre-1987 stock market crash, when mutual funds were all the rage.

One of the oldest and most respected investment managers is T. Rowe Price Group (TROW), founded by T. Rowe Price in 1937. 

Based in Baltimore, the company manages dozens of mutual funds for individuals and institutions, both here and abroad. The vast majority are rated four and five stars by Morningstar.

Business is booming. With 32% profit margins, revenues are up 12% to $4.5 billion in the past year. Plus, earnings grew 84% to $1.4 billion. 


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T. Rowe Price has $1.8 billion in cash and no debt. The company has also had a rising dividend policy for decades. 

Currently, TROW pays a quarterly dividend of 57 cents per share and it may well increase the payout when it reports third-quarter earnings tomorrow morning.

Wall Street analysts are seeing an increase in estimated earnings, so that’s positive news for the mutual fund firm. The stock also is selling for 16 times estimated earnings for 2018, below the industry average.

Let’s buy T. Rowe Price Group at market today and set a protective stop of $79 a share here.

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