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T. Rowe Group, Inc. (TROW) Message Board

  • buyrightkid buyrightkid Oct 1, 1999 1:10 PM Flag

    MONEY Mag. picked TROW 12/98

    Boy, were they wrong. Their picks sucked up canal water!

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    • frank302_forbes_for_prez frank302_forbes_for_prez Oct 19, 1999 10:37 PM Flag

      - looking at TROW like the overall market makes
      sense

      - in fact, I looked at the 1/4ly returns on T.
      Rowe's mutual funds from the last Barron's, and see
      they're mostly all down for the 1/4; & this explains the
      depressed stock price

      - since I have a long term
      view on TROW; and I'm pretty sure the market goes up
      decently after October; and MSFT turned in good #'s after
      the close today, I'm going to hang in there

      -
      thanks for the helpful analysis

    • Lower equity prices equal lower amount of funds
      under management which equals decreased earnings. Lower
      equity prices and volatile equity prices decrease fund
      inflows and may exacerbate fund withdrawals with a
      similar effect on earnings (fixed costs can not be
      decreased quickly to compensate this decrease in earnings
      and in fact may be increasing). This may also be
      happening with fixed income funds. Whether this is actually
      happening at TROW, there is a perception that it is, hence,
      the perceived value of TROW is less. Just as TROW
      moved up with the market (more so in percentage
      terms)it will probably fall harder when the market goes
      down (or is perceived to be going down). The market
      looks ahead and right now there is alot of uncertainty.


      Also more individuals are investing directly (if at
      all) in individual stocks rather than in funds. This
      is also a negative. Over the long run, an investment
      in TROW should do just fine. Short term it will be
      volatile (understatement!). I believe that as individuals
      find out that they aren't as astute as they thought
      they were regarding their investing prowess, they will
      return to funds. The last several years have been very
      kind to investors and it has been difficult not to
      make money. Alot of individuals don't have a clue how
      well their portfolio is doing relative to benchmarks,
      but because their portfolio has increased in value,
      they are happy. A nice correction should "scare"
      investors back to funds (hopefully). Speaking of
      benchmarks, index funds have also hurt TROW as investors have
      ditched actively managed funds for passive funds (index
      funds have greatly outperformed actively managed funds
      over many years). When one thinks of index funds, most
      think of the grandfather of indexing; Vanguard not
      TROW!

      Also hurting TROW are Fidelity & Schawb,
      both of which have successful asset capture
      strategies. TROW needs to be more aggressive in attracting
      assets.

      Of course the wild card is a takeover. TROW has been
      talked about a takeover target for many years. Since
      management owns a fairly big chunk of stock, any takeover
      will most likely have to be friendly. A lower share
      price may make TROW more attractive. Pimco is in play,
      being pursued by Allianz AG of Europe. There are not
      many public stand alone money managers left. Typically
      fund companies are acquired at 2%-3% of assets under
      management, the higher number goes to equity management
      (higher fees) the lower to fixed income such as Pimco.
      TROW has 159 billion under management of which 103
      billion is in mutual funds. Current value is 3.407
      Billion (28.125/share). At 3% of assets, TROW would fetch
      a premium of 1.40 its current share price which
      equals 39.38.

      This was quite a ramble but I hope
      it is helpful...obviously other poster's thoughts
      pro/con are welcome!

    • frank302_forbes_for_prez frank302_forbes_for_prez Oct 18, 1999 12:31 PM Flag

      - could it be when people short the s&p; that the
      fund shorts all the stocks - including trow?

      -
      by the way, I'm not a happy camper at the moment. So
      if you could hold your insults until trow comes back
      to $30+ I'd apprec. it.

      thanks.

    • When a stock is in the S&P, then dozens and
      dozens of mutual funds that track the S&P 500 have to
      buy the stock. And since many people contribute
      weekly and monthly to index funds in their 401K's, then
      there will be a steady growth in purchases of TROW.
      This should steadily drive the stock up!

    • frank302_forbes_for_prez frank302_forbes_for_prez Oct 13, 1999 10:34 PM Flag

      TROW was doing much better before getting stuck on to the s & p 500

      - hopefully, this decision w/b reversed

    • Jregghead responded for me...

      The math is
      not so simple. If it were, FASB would be able to more
      clearly define how to account fof options as liabilities
      without as much debate in academia.

      And I would
      also say that I haven't seen a company yet that has
      performed poorly *because* of options (isn't Microsoft
      always being criticized for this?).

      The big
      downside I see in a company that offers option packages is
      that if the underlying stock performs poorly, and a
      lot of employees are staying with a company because
      of vesting, they may be inclined to leave en masse
      during a lackluster performance period. That's the risk
      I see in today's market. People don't have to stick
      around in technology companies, if their options aren't
      worth much.

      Just a few thoughts.

      Spud

    • <EOM>

    • Going into S&P 500 is awesome for this stock. This baby should head back to $ for a 33% gain in very short order.

    • Hello,

      I think your points are well taken.
      Shares transfering from treasury stock to individuals
      obviously has an effect on earnings per share.

      I
      would not argue the premise of your point. However, I
      echo Spudguy's observation that the math is not
      simple. Options encountering a rising price have a much
      different impact than options encountering a falling price.
      This is one of the reasons why including probability
      in the calculation is important.

      My other
      point was another comment about why the math is not
      straight-line simple. Stock options are an incentive designed
      to make employees work harder to skew the
      probability of price increases/decreases to the positive
      side. I will testify that there are no guarantees, but
      I will not assume that such an incentive has no
      bottom line effect.

      Given these two issues, I see
      the math as pretty tough - and I can't buy a
      straight-line percentage of float as a significant number
      without a heck of lot of corresponding data to establish
      a realistic coefficient (multiplier).

    • not trying to be obtuse, but isn't the SEC
      looking into forcing companies to list options grants on
      the liability side of the ledger?

      Which if
      true, implies that they are dilutive.

      When the
      company grants a percentage of the company to someone
      (e.g., a stock grant,) it is no longer part of retained
      earnings.

      Did I miss something?

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TROW
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