(PUB) Morningstar FundInvestor - page 201

5 Morningstar FundInvestor May 2014
Morningstar Analyst Rating 04-24-14
´
Morningstar Pillars
Process
Performance
People
Parent
Price
Positive
Positive
Positive
Positive
Positive
Morningstar Analyst Rating
Morningstar evaluates mutual funds based on five key pillars, which
its analysts believe lead to funds that are more likely to outperform
over the long term on a risk-adjusted basis.
Analyst Rating Spectrum
Œ „ ´ˇ ¨
Pillar Spectrum
Positive § Negative ¶ Neutral
NAV 24.12 24.99 17.44 15.45 15.82 11.85 8.59 14.25 14.48 14.01 12.68 11.50
Total Return % -3.48 44.19 15.69 1.54 33.50 37.98 -36.28 9.35 3.35 10.49 10.26 40.24
+/-S&P 500 -6.04 11.80 -0.31 -0.57 18.44 11.52 0.72 3.86 -12.44 5.58 -0.62 11.56
+/-Russ 2000 Gr 1.19 0.89 1.10 4.45 4.41 3.51 2.26 2.30 -10.00 6.34 -4.05 -8.30
Income Return % 0.00 0.00 0.20 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Capital Return % -3.48 44.19 15.49 1.54 33.50 37.98 -36.28 9.35 3.35 10.49 10.26 40.24
Total Rtn % Rank Cat 32 31 26 13 16 36 14 42 96 19 65 64
Income $ 0.00 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Capital Gains $ 0.00 0.15 0.40 0.59 0.00 0.00 0.46 1.55 0.00 0.00 0.00 0.00
Expense Ratio % . 0.82 0.91 1.10 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25
Income Ratio % . -0.19 0.22 -0.78 -0.74 -0.68 -0.84 -0.63 -1.01 -0.83 -0.99 -1.03
Turnover Rate % . 13 15 17 18 28 30 47 39 29 26 23
Net Assets $mil 798 771 396 189 134 79 56 88 89 87 83 75
Performance 04-30-14
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total
2010
2011
2012
2013
2014
8.95 -9.22 14.76 17.62 33.50
11.44 0.28 -21.27 15.40 1.54
14.05 -5.39 5.76 1.38 15.69
12.56 3.26 13.52 9.28 44.19
-0.40 . . . .
Trailing Total +/- +/- Russ %Rank Growth of
Return% S&P 500 2000 Gr Cat $10,000
3 Mo
6 Mo
1 Yr
3 Yr Avg
5 Yr Avg
10 Yr Avg
15 Yr Avg
-1.51 -7.74 1.49 41 9,849
2.45 -5.91 1.18 35 10,245
23.58 3.14 2.12 23 12,358
12.28 -1.55 1.95 11 14,155
23.59 4.45 3.09 5 28,835
10.00 2.33 1.15 14 25,937
7.77 3.52 2.11 56 30,723
Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat
3 Yr (estimated)
5 Yr (estimated)
10 Yr (estimated)
11.83 7 0.41 25
23.29 3 0.25 25
9.61 9 0.35 16
Potential Capital Gain Exposure: 28% of assets
Rating and Risk
Time Load-Adj Morningstar Morningstar Morningstar
Period Return % Rtn vs Cat Risk vs Cat Risk-Adj Rating
1 Yr 23.58
3 Yr 12.28 +Avg Avg
5 Yr 23.59 High Avg
10 Yr 10.00 +Avg -Avg
Incept 7.05
Other Measures Standard Index Best Fit Index
S&P 500 Russ 2000 Gr
Alpha -4.8 2.2
Beta 1.30 0.95
R-Squared 87 97
Standard Deviation 17.30
Mean 12.28
Sharpe Ratio 0.75
Morningstar’s Take by Greg Carlson 04-24-14
T. Rowe Price Diversified Small-Cap Growth remains
consistently solid, if not spectacular.
This fund modestly surpassed its typical
small-growth peer in 2013 s furious rally, an impressive
feat given its strategy. True, manager Sudhir Nanda
and his team rely heavily on quantitative stock-picking
models, and quant funds performed well last year. (A
Morningstar list of quant funds beat 71% of their peers
on average in 2013.) But this fund pays scant attention
to earnings and stock price momentum--factors that
fueled quant funds’ fine 2013 showing. That’s because
momentum is a short-term phenomenon, and Nanda
looks to hold stocks for five years.
The models used here instead focus heavily on
valuation, earnings quality, and financial health. Thus
the fund’s holdings typically have far stronger
profitability measures, and less debt, than its typical
peers’. Nanda also reduces risk by spreading the
assets across 300 holdings and limiting position sizes
to 1%.
The fund’s approach isn’t a formula for consistent
success when stocks go up quickly. Indeed, since
Nanda took the helm in October 2006, the fund has
slightly lagged both its MSCI US Small Cap Growth
benchmark and the Russell 2000 Growth on average in
rising markets. But the fund has made up ground by
holding up better when equities turn south. Indeed, it
handily beat both indexes, as well as its typical peer in
2008’s downturn and 2011’s choppy environment.
During the whole of Nanda’s 7.5-year tenure through
March 2014, the fund has surpassed 93% of its peers
and both indexes on a risk-adjusted basis.
The fund has grown steadily as it has continued to
rack up solid returns, quadrupling in size since
mid-2012 to a recent $800 million. But capacity isn’t a
concern yet, given the fund’s small position sizes and
low portfolio turnover. Furthermore, the fund’s
expense ratio has fallen from 1.05% in mid-2012 to a
recent 0.82%--nearly one third below the median for
no-load small-cap funds. The fund’s cost edge,
repeatable process, and experienced skipper bode
well for its future.
Address: 100 East Pratt Street
Baltimore, MD 21202
800-638-5660
Web Address: www.troweprice.com
Inception: 06-30-97
Advisor: T. Rowe Price Associates, Inc.
Subadvisor: None
NTF Plans: N/A
Minimum Purchase: $2500 Add: $100 IRA: $1000
Min Auto Inv Plan: $2500 Add: $100
Sales Fees: No-load, 1.00%R
Management Fee: 0.35%, 0.15%A
Actual Fees: Mgt:0.64% Dist: .
Expense Projections: 3Yr:$262 5Yr:$455 10Yr:$1014
Income Distribution: Annually
Data through April 30, 2014
T. Rowe Price Diversified Sm Cap Growth Ticker Status Yield Total Assets Mstar Category
PRDSX Open 0.0% $798 mil Small Growth
100% 99% 99% 99% 95% 97% 99% 95%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 04-14
Historical Profile
Return
Risk
Rating
Above Avg
Average
Above Avg
Investment Style
Equity
Stock %
Manager Change
Partial Manager Change
Growth of $10,000
Investment Values of
Fund
Investment Values of
S&P 500
Performance Quartile
(within Category)
History
10.0
17.0
24.0
31.0
Portfolio Analysis 03-31-14
Share change since 12-13 Total Stocks:295 Sector PE Tot Ret% % Assets
T. Rowe Price Short-Term . . . 3.65
Middleby Corp Industrl 30.8 5.32 1.00
Maximus Inc Industrl 23.0 -3.13 0.84
Westinghouse Air Brake T Industrl 24.7 0.43 0.81
Hanesbrands Inc Cnsmr Cyc 26.1 17.25 0.79
NewMarket Corp Basic Mat 21.1 11.75 0.78
Incyte Corp Ltd Hlth care . -4.09 0.76
Boston Beer Co Inc Class Cnsmr Def 46.3 1.76 0.76
Old Dominion Freight Lin Industrl 25.3 14.35 0.75
Polaris Industries Inc Cnsmr Cyc 24.3 -7.44 0.75
FEI Co Technology 26.6 -10.74 0.75
Tyler Technologies Inc Technology 67.1 -20.05 0.73
Ultimate Software Group Technology 135.1 -21.92 0.72
Rite Aid Corp Cnsmr Def 33.2 44.27 0.71
Aspen Technology Inc Technology 51.0 2.85 0.71
Waddell & Reed Financial Finan Svs 22.8 4.62 0.71
Acuity Brands Inc Technology 34.7 14.19 0.70
J&J Snack Foods Corp Cnsmr Def 26.2 6.02 0.70
Gartner Inc Class A Technology 35.3 -2.97 0.69
Toro Co Industrl 25.0 0.22 0.68
Current Investment Style
Market Cap %
Giant 0.0
Large 0.3
Mid 50.4
Small 44.0
Micro 5.3
Avg $mil:
3,261
Value Blnd Growth
Large Mid Small
Value Measures Rel Category
Price/Earnings
Price/Book
Price/Sales
Price/Cash Flow
Dividend Yield %
23.14
3.40
1.75
10.56
0.49
1.10
1.39
1.26
1.13
0.71
Growth Measures % Rel Category
Long-Term Erngs
Book Value
Sales
Cash Flow
Historical Erngs
14.75
10.72
7.37
17.17
13.64
0.92
1.44
1.56
1.23
1.50
Profitability % Rel Category
Return on Equity
Return on Assets
Net Margin
18.31
7.21
8.66
1.58
1.67
1.27
Sector
Weightings
% of
Stocks
Rel
S&P 500 High
3 Year
Low
Cyclical 27.99 0.97
BasicMat 3.75 1.23 . .
CnsmrCyc16.47 1.92 . .
FinanSvs 5.98 0.38 . .
Real Est 1.79 1.23 . .
Sensitive 49.86 1.14
CommSrvs 0.38 0.09 . .
Energy 5.36 0.50 . .
Industrl 24.36 2.14 . .
Technlgy 19.76 1.13 . .
Defensive22.15 0.80
CnsmrDef 4.96 0.41 . .
Hlthcare 17.19 1.45 . .
Utilities 0.00 0.00 . .
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Composition - Net
(% of Stock)
Cash 3.2
Stocks 96.0
Bonds 0.7
Other 0.1
Foreign 2.7
© 2014Morningstar, Inc.All rights reserved. The information herein isnot representedorwarranted tobe accurate, correct, completeor
timely.Pastperformance isnoguaranteeof future results.Accessupdated reports at To order reprints, call 312-696-6100. mfb.morningstar.com. Mutual Funds ß® EQ
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