3 Upgrades for T. Rowe Price

Susan Dziubinski: Hi, I'm Susan Dziubinski with Morningstar. Morningstar recently upgraded the fund Analyst Ratings on a trio of funds from T. Rowe Price. Joining me today to discuss the reasons for the upgrades is Russ Kinnel. Russ is Morningstar's director of Manager Research and editor of Morningstar FundInvestor.

Hi, Russ. Nice to see you today.

Russ Kinnel: Glad to be here.

Dziubinski: So before we start getting into specific funds. Let's look a little bit about what the Morningstar fund Analyst Rating is. What are these ratings meant to capture? And how do analysts, what do they think about when they're assigning ratings?

Kinnel: Yeah, so these reflect our long-term view of a fund's potential to have superior risk-adjusted performance. So we're not trying to make a market call. We're not saying we like growth this week and value next week. It's very much fundamental-driven. So we focus on People, Process, and Parent--all the key fundamentals. How do those come together, and do they give the fund a good chance to outperform in the long haul? If we think it will outperform its benchmark, we give it a Bronze, Silver, or Gold, obviously, Gold being our highest conviction, we think most likely. If we don't think it will beat its benchmark, we give it either a Neutral or a Negative rating.

Dziubinski: So the first upgrade is T. Rowe Price Global Growth Stock RPGEX, which now earns a Gold rating. And it seems to score well across those three main pillars that we look at. Talk a little bit about why we upgraded this fund.

Kinnel: Yeah, so we upgraded the Process Pillar to high. Scott Berg is a kind of classic growth investor who's done a really good job. And you know, it's interesting, we split the world stock category into three, from value to growth. And this is a growth fund, and some world growth funds, their performance didn't look so good once you isolated them with other growth funds. This fund still has great performance. Berg's just a very good growth investor, and I think growth investing is kind of in T. Rowe's wheelhouse. And one of the things I like is the fund is fairly small, $1.3 billion. A lot of T. Rowe's best funds are kind of swamped with assets. This one is not yet.

Dziubinski: Then next is T. Rowe Price Global Technology PRGTX, which we upgraded to Silver from Bronze. So give us a little bit of background on this fund and why we upgraded it.

Kinnel: Yeah, it syncs nicely with the previous one because again, I think growth and tech investing is very much in T. Rowe's wheelhouse. They've been early in a lot of the big names, tech stocks, they've got a deep staff. And so we like that Alan Tu is a fairly new manager on the fund. So far things have been good with him. It's more about the process and the depth of team here that led us to the upgrade. I think T. Rowe is just a very good place to go for tech investing.

Dziubinski: And then lastly, there's T. Rowe Price Floating Rate PRFRX, which now earns a Gold fund Analyst Rating. And in fact, in the analysis, the analyst says that the team running this fund is one of the best in its class. So what makes this fund tick and why the upgrade?

Kinnel: Yeah, so floating rates are kind of a tricky place to invest, because you're talking about bank loans to below-investment-grade borrowers. And bank loans tend to be less liquid. So you really want a careful shop, you want to a firm with a deep team. That same reporter also described meticulous research and that's what you want, you want people who are going deep. Paul Massaro has done a really good job at this fund over about a 10-year period. And so we're really impressed by them. I think you want to be careful with who you invest with, with a bank loan fund, because it is kind of treacherous territory, and they've just done an outstanding job. If you look at the record, they tend to have about market-like losses in a downturn, but well above that upside in a rally and the long-term record is just really strong.

Dziubinski: Well, Russ, thank you for your time today for putting these T. Rowe Price upgrades into perspective and for giving us some background on the ratings overall. We appreciate it.

Kinnel: You're welcome.

Dziubinski: I'm Susan Dziubinski. Thank you for tuning in.