This Foreign-Stock Fund Has All the Makings of a Good Core Holding
Silver-rated T. Rowe Price Overseas Stock boasts below-average costs and a personnel edge over its peers.
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T. Rowe Price Overseas Stock's many strengths remain intact; it retains its Morningstar Analyst Rating of Silver.
This foreign large-blend fund has two inherent advantages over the majority of its rivals. First, like most international-equity offerings in its family, it has below-average costs and thus enjoys a performance head start over most of its peers year after year. Second, T. Rowe Price is an excellent parent, and it has had considerable success with its actively run international-equity funds. (Eight of the firm’s nine other active international-stock funds with Analyst Ratings are Morningstar Medalists.)
This fund also has a personnel edge over the most of its peers. In addition to running this fund since it opened 12 years ago, Ray Mills has managed a foreign large-blend separate account since it opened in early 2000 and delivered good long-term total and risk-adjusted returns there, so he is more seasoned and skilled than the majority of foreign large-cap skippers. Further, Mills has T. Rowe's well-respected squad of more than 160 sector and regionally focused equity analysts to draw upon for investment research ideas as well as the firm's other international-equity managers. This group of managers is quite experienced and talented overall.
Mills is relying on the same sensible and repeatable process here as he has employed successfully at his foreign large-blend separate account. Specifically, he is making full use of the style spectrum by buying a healthy mix of traditional bargain stocks, classic core holdings, and mainstream growth names. He is allowing his selection to lead to moderate country and sector over- and underweightings while avoiding oversized ones, and he is paying ample attention to issue diversification.
Finally, although Mills has posted unexceptional results with this process during the past year’s tumultuous climate, he has earned good results with his approach in various conditions in in the past. This fund, therefore, boasts earned superior three-, five-, and 10-year, and since-inception total and risk-adjusted returns.Process Pillar: Positive | William Samuel Rocco 03/19/2019
This foreign large-blend fund remains quite diversified by issue. It owned 159 stocks and devoted 18% of its assets to its top 10 holdings as of Dec. 31, 2018, versus 100 equities and 22% in the top 10 for its typical actively run rival and 919 stocks and 12% in the top 10 for its MSCI EAFE Index benchmark.
This fund has an assortment of moderate sector overweightings and underweightings. It owns 37 financial-services stocks, including top-25 holdings Munich Re MUV2, AXA CS, BNP Paribas BNP, DNB DNB, and Tokio Marine. It has a 24.0% weighting in that sector overall versus 18.9% for its average peer and 19.3% for the MSCI EAFE Index. It also has modestly more exposure to technology and healthcare stocks than both its typical rival and the benchmark. Conversely, manager Ray Mills hasn't found all that many attractive opportunities in the basic-materials, industrials, and consumer-defensive sectors, so this fund has somewhat less exposure to all three sectors than its average peer and the index.
This fund also has modest overweightings in the United Kingdom, Norway, and certain other markets as well as moderate underweightings in Spain, Hong Kong, and certain other markets. It has a 8.1% stake in emerging-markets stocks, whereas its average peer has a 10.2% position in such equities and the index has no exposure to such names.Performance Pillar: Positive | William Samuel Rocco 03/19/2019
Mills' stock selection has been on the mark in various investment climates in the past, which has helped this fund earn superior three-, five-, and 10-year and since-inception returns. For example, it delivered a 10.7% annualized return over the 10 years through Feb. 28, whereas its typical peer posted a 9.2% annualized return, and the MSCI EAFE Index produced a 9.6% annualized return during the period. It earned a 2.4% annualized return since opening at the end of 2006, whereas its typical peer produced a 1.9% annualized gain and the benchmark posted a 2.0% annualized gain during the period. It also delivered fairly average volatility along the way, so it has superior Morningstar Risk-Adjusted Returns over all four periods.
Because of its medium- and long-term success, this fund merits a Positive Performance rating.People Pillar: Positive | William Samuel Rocco 03/19/2019
Unlike some T. Rowe Price skippers, Mills does not work with an associate portfolio manager. He collaborates with the firm's 14 other foreign-stock managers, who have 14-27 years of investment experience each, including the skippers of Bronze-rated T. Rowe Price International Stock (PRITX), Silver-rated T. Rowe Price European Stock (PRESX), Silver-rated T. Rowe Price Emerging Markets Stock (PRMSX), and Bronze-rated T. Rowe Price New Asia (PRASX). Mills also makes extensive use of T. Rowe's team of more than 160 sector and regional specialists spread across six offices around the world.
Because of Mills' considerable investment experience and skill, plus the size and strength of his support team, this fund earns a Positive People rating. (The Feb, 25, 2019, report on this fund mistakenly listed the people rating as Neutral.)Parent Pillar: Positive | 10/01/2018
William Samuel Rocco does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.