Thomas Rowe Price Jr: From the Great Depression to Global Dominance

1 minutes reading time
Published 1 Sep 2023

If you've ever delved into the world of investing, chances are that you've come across the name Thomas Rowe Price Jr. From his groundbreaking investment strategies during the turbulent times of the Great Depression to the enduring impact of his Growth Investing philosophy, Price is considered one of the most famous investors in history. With a legacy still visible in today's investment landscape, understanding the journey of Thomas Rowe Price Jr. offers a captivating insight into the evolution of modern investing. Let’s dive in.

Origins and Investment Philosophy

Born in 1898, Thomas Rowe Price Jr. was an ambitious individual right from the start. As he matured, his ambition merged with a deep understanding of market dynamics. Before founding his own investment firm T. Rowe Price in 1937 amidst the Great Depression, he spent 12 pivotal years at Mackubin, Legg & Co. in Baltimore. While rising to head the Investment Counseling Department at Legg, Price's principles began to clash with the firm's commission-based investing approach. He believed in the client's best interests, advocating for annual fees instead of commissions.

Price’s growth stock philosophy — focusing on investing during a company's early growth and emphasizing fundamental research — became the cornerstone of his success. This approach was so distinct that interviewing a company's management before stock purchases became synonymous with T. Rowe Price. This philosophy bears a close resemblance to that of Philip Fisher, who is known as the father of growth investing and for coining the term “scuttlebutt.”

Cornelius Bond was a man who worked closely with Price. He frequently emphasized that Price prioritized client success over personal wealth accumulation. Price's ethos was straightforward: "If you treat the customer right, he will reward you in the long term." The focus on growth and fundamentals, combined with a customer-centric approach, soon proved highly successful. Today, T. Rowe Price remains a prominent player in the financial world with assets under management (AUM) of roughly $1.4 trillion as of July 2023, and Thomas Rowe Price Jr. is still regarded as one of the best investors in history.

T. Rowe Price Growth Stock Fund

The T. Rowe Price Growth Stock Fund was launched in 1950. Under Price's leadership, the fund invested in companies like IBM and showcased an impressive performance. In fact, in its first decade, it produced the best performance record of any U.S. equity mutual fund with the objective of growth.

Price's relentless integrity and client service set a gold standard in the investment world, and he was always keen on winning. His dedication was apparent in every detail, from ensuring letters had no typos to personally communicating with clients.

Cornelius Bond summarized Price's aspirations: “Running a large organization or generating a large stream of income was never important to Mr. Price. His ultimate goal was simply to produce the best investment record in the country. Mr. Price was very competitive. He liked to win."

The Growth Investment Philosophy

In a world where most investors favored low-risk strategies, Price introduced a fresh perspective. His philosophy focused on investing in companies that showed potential for above-average growth in earnings, even if they appeared somewhat overpriced at the time. Price believed that the true potential of these companies would eventually translate to greater returns. This insight has clear similarities to Charlie Munger’s and Berkshire Hathaway’s approach to investing in what they call "compounders." This strategy, termed as 'Growth Investing', was initially met with skepticism. However, as his investments began to bear fruit, the finance world took notice.

A Legacy that Lives On

The legacy of Thomas Rowe Price Jr. stands as a testament to his vision and relentless pursuit of excellence. In an era dominated by conventional wisdom and risk-averse strategies, Price's introduction of the 'Growth Investing' philosophy challenged the status quo and rewrote the rules of investing. His emphasis on integrity, client service, and a focus on long-term growth set a benchmark that continues to resonate within the financial industry to this day.

So, the next time someone asks you, "What is Thomas Rowe Price Jr.?", you now have a comprehensive story to share. It's not just about a company or a fund; it's about a visionary named who redefined the paradigms of investing and left an indelible mark on the world of finance.