Summary
- The economic backdrop is OK, but the recession probabilities are definitely higher.
- TROW is a solid company.
- The chart is soft.
Investment thesis: While the company is rock-solid, the charts are soft.
T. Rowe Price (NASDAQ:TROW) is an investment manager:
T. Rowe Price Group, Inc. is a publicly owned investment manager. The firm provides its services to individuals, institutional investors, retirement plans, financial intermediaries, and institutions. It launches and manages equity and fixed income mutual funds. The firm invests in the public equity and fixed income markets across the globe. It employs fundamental and quantitative analysis with a bottom-up approach. The firm utilizes in-house and external research to make its investments. It employs socially responsible investing with a focus on environmental, social, and governance issues. It makes investment in late-stage venture capital transactions and usually invests between $3 million and $5 million.
It is the 7th largest company in this sector, out of 204.
It is also a dividend aristocrat – a stock that has increased its dividend for at least 25 years. The stock is currently yielding 3.14% and has increased its dividend for 36 consecutive years.
My standard method for analyzing a company is to first look at the macroeconomic backdrop, followed by an analysis of the company’s financials, and, finally, the stock charts.
Last week, I wrote an article on the DIA that included an in-depth look at the economy using the long-leading, leading, and coincidental indicator analytical method. That data is still viable. I concluded:
The non-financial data is still positive. But there are signs of concern in the financial data. This is usually what happens before a recession: the credit markets tighten, and the yield curve inverts. And this is before we add in the tightening Fed variable, which is also bearish.
The biggest economic challenge now is the Federal Reserve, which has set out on a course of rate hikes. The central bank’s biggest challenge is finding the neutral rate – the one that is neither stimulative nor regressive. That is a very difficult challenge and has only been achieved once since the end of WWII.
The problem for (TROW) is that a growing economy is far more beneficial for investment managers. A strong economy causes a rising stock market which attracts investors. A recession has an obviously negative impact. In short, the economic pictures could be better.
