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David wrote today: "We must all constantly ask ourselves, "Is MY money invested right now the best way it can be?"

My question is: Do you still believe in T Rowe?



Hi all,

I've got a new user name here. I'm no longer going by MrShihTzu (though IMHO, it will always be the best breed of dog there is). I just figured a change might be nice, so I now go with my favorite food, rather than my favorite breed of dog. Both of our ShihTzus love grapes as well, so the connection is still there :-)

I saw there were a few questions on T. Rowe (including this one). I have been thinking about it a bit myself lately.

When we bought it, my reasons for supporting it from a business perspective were basically as follows:

-- Despite the best intentions of TMF, there will still be people that invest in mutual funds rather than stocks.

-- Of the public fund companies, T. Rowe was the one that I respected the most.

-- T. Rowe's funds have relatively low expense ratios, something that I believe is very important.

-- The majority of 401(k)'s offered by companies require that employees invest in the mutual funds that are offered rather than individual stocks.

-- T. Rowe has a strong position in the 401(k) market (as a matter of fact, that's the provider that my wife's company uses).

That's the business advantages that I saw. The question is then, do those things still apply and/or are there better places to put my money.

Right now the biggest question that I have is whether or not I still have respect for management. As you'll see if you read the annual report, it looks as if management is being a bit too generous with stock options. Plus, I know from some other reading that I've done that many fund directors are paid way too much in relation to their responsibilities. In reading through the proxy I was compelled to vote against all directors (something that I can't recall doing before).

I also didn't like the fact that the proxy didn't include any other issues specifically, just a request that shareholders agree to let their shares be voted as the company saw fit on all other issues that might come up. AND, you could only abstain or vote for that. A blanket no was not allowed. I've never seen that on a proxy before. I'm left with a bad taste in my mouth.

I think the other reasons I liked the business model still hold though. But, I can't deny that I feel a bit uncomfortable owning this company right now.

Yes, the company has underperformed badly since we bought it, too. As a long-term investor, that doesn't mean all that much to me yet. The original commitment was for 10 years. We've been through about 14 months so far. A lot can happen between now and then.

From what I can tell the business model still seems intact. I do have less trust/faith in management than I did when we bought for this port. (I bought some, too, as I own every stock we own in this portfolio personally as well.)

Looking at what I've written above, I can say that an argument can be made that we might have a reason to sell. Of course, my reaction to what I've come across in terms of losing some respect for T. Rowe's management may not be the same as that of my fellow managers. If it's not, then there's no reason to sell if one believes that the business model is still intact. However, if the concern is shared, then further discussion is merited.

I know that I haven't given a definitive answer, but I really don't want to right now. What I would like to hear is more feedback.

Foolishly,

Phil
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