Manager spotlight

David Giroux, Portfolio Manager of the T. Rowe Price Capital Appreciation Fund (PR WCX)
David Giroux, Portfolio Manager of the T. Rowe Price Capital Appreciation Fund (PRWCX)

A Low-Risk Strategy With Solid Return Potential

David Giroux, portfolio manager of the T. Rowe Price Capital Appreciation Fund, uses a flexible asset allocation approach to find value in the market.

he T. Rowe Price Capital Appreciation Fund aims to offer equity-like returns with less price volatility than the overall market by investing in a range of stocks, convertible securities, bonds, and cash. Within equities, Giroux favors a fairly concentrated portfolio of fewer than 70 stocks. "We have a lot of leeway to go where we see value," he explains. "But we typically seek out the most compelling 65 to 70 investments within the mid- and large-cap universe. That means having confidence in the process and a willingness to take chances and be wrong once in a while."


Giroux decided on a career in finance during his junior year at Hillsdale College in Michigan, where he and a friend applied for a grant to start an investment partnership. To prepare, he read several dozen investing books, including Benjamin Graham and David Dodd's classic Security Analysis. Giroux didn't win the grant, but he did land a job at T. Rowe Price as an associate analyst right after graduation in 1998. Less than two years later, he was made a full analyst covering industrials. By 2006, he was named portfolio manager of the Capital Appreciation Fund.

Giroux finds investment opportunities with help from an experienced team of U.S.-based analysts. An executive committee—made up of one analyst per sector, traders, and research associates—meets monthly to help guide his investment decisions across various asset classes to find the best balance of risk and potential reward. "What makes investing so interesting is that everybody does it a little bit differently," Giroux says. "There are inefficiencies in the market that create opportunities for those who are willing to walk into uncertainty. It's how you gain an edge."


Those opportunities often come in the form of companies undergoing some stress or short-term challenge: a firm that just missed earnings expectations, made an unpopular acquisition, or was in a sector that has fallen out of favor. In seeking undervalued companies, Giroux also tries to find investment opportunities—both in equities and bonds—where he believes value could be created by a company being acquired, going private, or breaking apart.

Giroux attributes the Capital Appreciation Fund's success to its flexible strategy and the strength of the T. Rowe Price research team, which helps generate ideas and highlight opportunities in the marketplace. "We can create significant risk-adjusted returns over time," he remarks. "And we can go where we see opportunity to create value for our shareholders."

Because of the fund's fixed income holdings or cash position, it may not keep pace in a rapidly rising market. The fund's value orientation carries the risk that the market will not recognize a security's intrinsic worth for an unexpectedly long time or that a stock judged to be undervalued is actually appropriately priced.

Photograph by SARMA OZOLS
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