In late 2008, many investors began selling securities just as quickly as the markets were declining. Where others saw depreciating stock prices, Joseph Milano, portfolio manager of the T. Rowe Price New America Growth Fund, saw opportunities for growth.
"Few investors wanted to take risks in 2008, which made it a good time to do exactly that since assets were cheap," he says. In the competitive growth fund arena, Milano believes that it takes bold action to stand apart. "What I've learned over the years is that you have to do things a bit differently from other investors if you want better results."
Considering Milano's commitment to contrarian strategies, it's not surprising that the New America Growth Fund invests in several companies that are not household names. "Given the fund's growth charter, I have the ability to buy shares of companies that may be unknown or down and out at the time but appear to have strong financials and prospects for the future," he explains.
- In the health care sector, some investors may view the prospect of reform as a potential drag on stock prices. However, Milano has invested in companies that may gain business from government incentives to digitize health care records and from mandates to cut prescription drug costs.
- In the natural gas industry, which has struggled because of excess supply, Milano sees the potential for growth. "I believe that we have smart people in this country who can figure out new uses for this cleaner burning gas and that the supply-and-demand dynamics are going to be better than people think," Milano says. As an example, he points out that buses now run on natural gas in many American cities.
When selecting investments for the New America Growth Fund, Milano looks for well-managed businesses with substantial opportunities. This strategy holds no matter what the near-term economic picture may be.
"I'm focusing on the next 18 months rather than the next three. Had I taken a three-month approach in the fall of 2008," he states, "I likely wouldn't have been able to take advantage of the great opportunities at that time since it was clear the markets weren't going to turn around that quickly."
Milano advises individuals to maintain a similar long-term view of growth investing. "The reason to own a growth fund is because of its potential for compounding. So in order to take full advantage of the appreciation the fund may have to offer, you want to consider the absolute value of the investment, regardless of what's going on in the economy."
The fund is subject to market risk, and share prices may decline more than those of non-growth-oriented funds in down markets due to the higher valuations/lower yields of growth stocks.
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