A Classic Contrarian

Brian Rogers, portfolio manager of the T. Rowe Price Equity Income Fund (PRFDX) for more than a quarter-century and the chairman and chief investment officer of the firm, has built an enviable record by going against the grain. 

Managing the fund since its inception in 1985, Rogers has built it into one of T. Rowe Price’s flagship offer-ings by putting his own spin on a traditional, value-based investment approach—taking large positions in out-of-favor blue chips and holding them for the long term.

Key Influences

Raised in Massachusetts by two teachers, Rogers graduated from Harvard University in 1977 with a degree in economics. After looking for a job that would help him pay off his student loans, he landed at Bankers Trust Company in New York at a time when oil  embargoes, double-digit inflation rates, and lagging financial markets dominated the headlines. To Rogers, all the turmoil made the financial world seem important and exciting. Rogers returned to Harvard in 1980 to attend business school, where he studied finance. “That’s where I really began to learn more about the business and the craft of analysis,” he says. And it’s where Rogers discovered the work of David Dreman, a noted contrarian investor. Intrigued by the possibilities of going against the crowd, Rogers began to develop his own classically contrarian approach. He joined T. Rowe Price in 1982 and started the Equity Income Fund three years later. “It made sense to me to buy cheap, out-of-favor companies, pay the  proverbial 50 cents on the dollar, and wait for them to return to favor,” he recalls. “It just seemed like the logical way to make money.”

The Core Questions

Rogers looks for companies with what he terms “good quality and bad psychology.” He asks three core questions: Is the company valuable—important enough that investors would miss it if it disappeared? Is it fixable, with the help of a capable, motivated management team? And, is the company lovable? If investors in the past have paid a higher valuation than the stock trades at today, they may be willing to pay that valuation again.  Under Rogers’ direction, the Equity Income Fund is among 23 T. Rowe Price funds named “Analyst Picks” by Morningstar, Inc.* The fund also has frequently appeared on lists of recommended funds published by several personal finance magazines. Of his years at the fund’s helm, Rogers says, “When you’ve managed a fund for a long time, you make decisions more quickly. It’s not that investment management gets easier—the process just becomes second nature.”

 The value approach carries the risk that the market will not recognize a security’s true worth for a long time, or that a stock judged to be undervalued may actually be appropriately priced.*As of 11/8/11. Morningstar Inc. selects its Analyst Picks based on its assessment of the fund’s track record, volatility, strategy, management, and expenses.

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