T. Rowe Price Equity Income Fund (PRFDX)
Ticker Symbol:
Fund Status:
Open to new Retail investors  /  Open to subsequent Retail investments
Fund Management
Fund Manager
  • John D. Linehan, CFA
  • Managed Fund Since: 11/01/2015
  • Joined Firm On 06/11/1998*
  • B.A., Amherst College; M.B.A., Stanford University

*Firm refers to T. Rowe Price Associates and Affiliates
Quarterly Commentaries
as of 09/30/2015

U.S. large-cap stocks fell in the third quarter as uncertainty about China more than offset generally favorable domestic economic data. China's efforts to stem a stock market selloff and its unexpected currency devaluation in August highlighted the country's economic slowdown and raised questions about the Chinese government's ability to manage the economy. The Federal Reserve kept the federal funds rate near 0% at its September policy meeting, but the central bank's cautious comments about global economic developments weighed on investor sentiment. The Standard & Poor's (S&P) 500 Index slid 6.44% in the quarter, with only the utilities sector posting positive returns. Energy and materials were the worst-performing sectors, down 18% and 17% respectively, as commodities prices plunged on expectations of weaker demand from China.

The Equity Income Fund returned −10.24% in the quarter compared with −6.44% for the S&P 500 Index and −7.25% for the Lipper Equity Income Funds Index. For the 12 months ended September 30, 2015, the fund returned −9.01% versus −0.61% for the S&P 500 Index and −4.24% for the Lipper Equity Income Funds Index. The fund's average annual total returns were −9.01%, 9.73%, and 5.24% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.66% as of its fiscal year ended December 31, 2014.

For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.

Benchmark Definitions

Financials were the largest overweight sector as of September 30, 2015, due to our holdings in the bank industry. Financials stocks have rebounded from the 2008 global financial crisis, but we believe that valuations of select companies still appear reasonable and that the sector provides good leverage to the improving U.S. economy. Utilities and energy are other significant overweight sectors in the portfolio. We seek energy companies with access to reliable, high-quality oil and gas sources, solid production growth, and adequate resources to find and develop capacity. Though we believe that commodity prices will stay subdued over time due to increased global supply, we believe that some companies operating in the midst of industry downturns or facing pricing pressures can represent good opportunities for long-term investors. Information technology remains the largest underweight sector, followed by health care.

Our near-term outlook remains cautious. Valuations are more in line with historical levels after the third-quarter's declines, and we expect to see reasonable economic and earnings growth for the rest of the year. However, there remain large overhangs in the global outlook, including China's continued slowdown, deteriorating conditions in other big emerging markets, and political instability in the Middle East. We expect modest returns in the U.S. stock market as the impact of weak oil prices and a strong dollar continue to weigh on S&P 500 earnings. Prices in many areas of the market are reasonable, however, and the quarter's decline has opened up opportunities to buy quality companies that we believe were indiscriminately sold off. We will continue to employ our disciplined investment approach and focus on buying high-quality, well managed companies that have strong competitive and financial positions along with attractive value characteristics.

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