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Taming the Beast: Wall Street's Imperfect Answers to Making Money by Larry Light

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Chapter 5

The Fast Lane: Growth Investing

If Ben Graham is the father of value investing, his opposite number is Thomas Rowe Price, who begat the first well-known growth stock strategy. Let’s be clear: there is no Graham of growth, no deep-thinking scholar who constructed an intellectual monument that will last through the ages. Price pioneered a practical growth investing technique more in the spirit of a wealth manager looking to compile a good record than of a financial theorist questing for immortality.

Unlike the scintillatingly brainy Graham, Price did not leave behind thick, iconic books filled with ruminations on share valuations. He eked out a few pamphlets and articles, and once said, “I’m not very bright.” Unlike Graham, Price did not produce quotable nuggets of wisdom that are repeated to this day by adoring acolytes as if they were utterances from on high. His name is mostly forgotten. Price’s most lasting legacy is the firm he built, T. Rowe Price, a prominent Baltimore investment manager that is no longer regarded as a growth shop; many of its mutual funds now have a value tilt.

His contribution to the financial world is that he figured out how to find a good growth stock, distinguishing it from a faddish issue that will fade. His insights offer a clever alternative to the ever-present animal urge to buy hot stocks quickly. In nature, predators instinctively pounce on what is racing away. But what if the fleeing prey is a skunk? Price taught how to tell the difference ...

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