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What's Wrong With T. Rowe Price Blue Chip Growth?

Change is afoot at this large growth fund. Here's what Morningstar's analyst has to say about it.

The T. Rowe Price Blue Chip Growth (TRBCX) strategy, including the John Hancock subadvised fund, exchange-traded fund, separate account, and offshore vehicles, benefits from a deep team and well executed process. It earns Morningstar Analyst Ratings ranging from Silver to Neutral, depending on fees.

Manager Paul Greene assumed control of this strategy at a precarious time in October 2021. The strategy lagged its benchmark for three straight calendar years from 2019 to 2021 and struggled in 2022 through May as the U.S. mutual fund’s no-load shares dropped 28.2% versus a 21.9% decline for its Russell 1000 Growth Index benchmark. While the strategy’s higher-growth tilt explains some of its weakness, stock-picking woes have been the larger culprit. A key underweighting in Apple (AAPL), the largest position in the benchmark, and missing out on much of Tesla's (TSLA) 2020 ascent account for a chunk of the deficit, but other picks such as Carvana (CVNA), Snap (SNAP), and a handful of China-domiciled tech companies such as Alibaba (BABA) have all taken a toll amid the ongoing growth rout.

Despite a difficult stretch, a few factors stand in the strategy's favor. First, some vehicles converted to nondiversified status in June 2021, giving Greene greater leeway to express conviction regardless of a stock's benchmark weighting. The strategy’s underweighting in Apple was intentional, but the magnitude of that position (at times 6 to 7 percentage points lower than the benchmark's) was influenced by the restrictions of its "diversified" classification, which prevented more than 25% of the portfolio from being invested in stocks with weights greater than 5%. T. Rowe's institutional knowledge and depth of research resources are still an advantage, and despite some shuffling related to the firm's March 2022 split into two distinct research organizations, the supporting team confers an edge. Last, the strategy's historical performance suggests it should make up ground once sentiment turns back in favor of growth stocks.

The strategy's recent results have underwhelmed, but it has the pedigree and tools needed to perform better.

Key Proprietary Morningstar Metrics

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

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