July 19, 2012
|Portfolio Manager Dan Martino|
Investors interested in the worldwide expansion of communications technology might consider the T. Rowe Price Media & Telecommunications Fund (PRMTX).
Portfolio Manager Dan Martino and a team of T. Rowe Price analysts apply their deep knowledge in media and telecommunications to provide investors access to a selection of U.S. and international stocks, including shares of search engine firms, communications tower owners, cable companies, and content providers. "Many telecom trends start in developed markets and then move over to emerging markets," Martino says. "Even though there are regional differences in how some of these trends play out, there are also many similarities. Our deep institutional knowledge allows us to find compelling investment opportunities as trends evolve."
As of June 30, 2012, the Media & Telecommunications Fund held 56.9% of its assets in media; 22.3% in telecom services; and smaller allocations to sectors such as hardware, telecom equipment, and software. The portion of the fund devoted to media stocks typically emphasizes growth-oriented companies that have the potential to disrupt traditional industries. LinkedIn, for example, is a social networking company that is changing the way corporations recruit and hire.
To reduce volatility in the portfolio, Martino and his team supplement the media portion of the portfolio with a more value-oriented approach in the balance of its holdings. The fund invests roughly 10% of its assets in wireless communications tower companies. Strict zoning requirements across the U.S. make it difficult to build towers, while the increasing appetite of consumers for wireless devices makes the existing infrastructure highly valuable. "In this part of the portfolio, we look for attractive business models that have really durable barriers to entry and high returns on capital," Martino says. "These aren't the kind of stocks that are going to produce enormous returns in a given year, but we continue to find them very attractively valued."
Martino believes the combined growth-and-value approach of the Media & Telecommunications Fund sets it apart from its peers. He says, "There aren't very many funds in which about 40% of the holdings offer less volatility and cheap, free cash flow, while the rest consist of attractive growth companies levered to the secular growth trends we see unfolding in technology, media, and telecommunications over the next three to five years."
The fund's strategy has served shareholders well. The Media & Telecommunications Fund ranked #2 over the 1-year, and #1 over the 3-, 5-, and 10-year and since-inception (10/13/93) periods ended June 30, 2012, based on cumulative total return.* Of course, past performance cannot guarantee future results. "A fund like this is only as good as the analysts who contribute to it," Martino says. "So the fund's success over these periods is a direct result of the excellent investment ideas produced by T. Rowe Price's knowledgeable, experienced analysts. And the demand for both wired and wireless broadband and the growing impact of social media mean that our team will have even more compelling companies to consider in the months and years to come."
Current performance may be higher or lower than quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. Click here for the funds' most recent month-end performance. The fund's expense ratio as of its fiscal year ended 12/31/11 was 0.83%.
Media and telecommunications companies are subject to special risks, including intense competition and rapid obsolescence. And because the fund is industry specific and can invest without limit in foreign securities, its share price could be more volatile than an all-domestic fund investing throughout the general economy.