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Why T. Rowe Price New Horizons Remains a Top Growth Fund

The small- and mid-cap growth fund should continue to generate great results, says Morningstar's analyst.

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T. Rowe Price New Horizons (PRNHX) earns a Morningstar Analyst Rating of Silver because of its strong resources and process.

Manager Joshua Spencer has picked up where his predecessor Henry Ellenbogen left off, and that's quite an accomplishment. Even with a down year in 2021, the strategy has outpaced its benchmark and typical rival by more than 5 annualized percentage points since Spencer took over in March 2019.

Spencer was a logical choice to take over this strategy nearly three years ago. He served on the strategy's advisory committee, had direct input on the portfolio's tech stocks, and built a strong track record managing T. Rowe Price Global Technology (PRGTX) from June 2012 until May 2019.

Spencer has borrowed many aspects of Ellenbogen's investing style. He similarly anchors the portfolio in steadier businesses with established competitive positioning while mixing in more volatile fare, such as biotechnology stocks. He also leans heavily on his advisory committee, a group of hand-picked analysts and portfolio managers tasked with providing additional insights on stocks or portfolio positioning. Spencer similarly holds on to his winners as they appreciate from small caps into mid-caps, explaining the strategy's continued fit in the mid-growth section of the Morningstar Style Box. Incorporation of private investments remains a differentiator as well.

T. Rowe Price's upcoming organizational split into two distinct research entities in 2022 won't change too much for this strategy as it will remain with most others as part of T. Rowe Price Associates. Spencer will keep key healthcare and technology personnel, though several advisory committee members will transfer to T. Rowe Price Investment Management.

This strategy's size at over $50 billion in assets remains its greatest hurdle, and that will still be the case even after a handful of the firm's biggest small- and mid-cap strategies roll into the separate research unit. Small position sizes, lower-than-average turnover, and a long-term investment horizon help mitigate trading difficulties but by no means eliminate them. Despite its bulk, the strategy should continue to generate great results.

Key Proprietary Morningstar Metrics

Morningstar Analyst Rating: Silver
Process Pillar: Above Average
People Pillar: Above Average
Parent Pillar: High

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Adam Sabban does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.