T. Rowe Price

Chapter SeventeenWEAK PERFORMANCE OF THE GROWTH STOCK FUND, 1970s

This chapter includes discussion of the present and the author's investment advice.

T. Rowe Price, as a firm, has produced good long‐term stock market results over many years and is continuing to do so. The only lengthy period of time when this was not true was during the decade of the 1970s. During that time, based on the Growth Stock Fund's annual results in its annual reports, which generally reflected the Councilor Division, the Growth Stock Fund only outperformed the Standard and Poor's 500 Index annually on four occasions, and ranked near the bottom of mutual funds with a goal of equity growth with income secondary. This was quite a comedown from being the number one fund in the country in its category for its first ten years.

Largely because of the outstanding results of the T. Rowe Price funds and the firm's pension clients in the 1960s, however, T. Rowe Price Associates began to take on a disproportionate share of new business in the early 1970s, as discussed in the April 1972 issue of Fortune. Competitors' clients began to demand exposure to growth stocks. Many investment firms responded by investing in the same growth companies that were publicly displayed in the Growth Stock Fund and New Horizons shareholder reports. The larger growth companies in the Growth Stock Fund were even given a special name in the financial press: the “nifty fifty.” Soon, the pension funds and fund portfolios of competitors ...