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This Nasdaq Stock Is Up 22,660% Since the 1980s -- But Are Its Best Times Behind It?

By Dan Caplinger – Jan 12, 2022 at 12:44PM

Key Points

  • The Nasdaq was trading roughly flat at midday Wednesday.
  • T. Rowe Price shares were down substantially despite healthy year-end asset levels.
  • Many are worried that inflation could hurt the tech stocks that have been responsible for so much of T. Rowe Price's success.

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In a little-watched corner of the market, a company has started to pull back from decades of strong gains.

Investors have had a lot of trouble trying to navigate the current stock market environment, and Wednesday's numbers on inflation didn't help to clarify things very much. At 11:30 a.m. ET, the Nasdaq Composite (^IXIC) was up just 3 points to 15,157, having given up larger gains from earlier in the session and still well below its record levels from last year.

One thing that's been interesting to look at in recent months is how some of the best performers that trade on the Nasdaq have fared. Most investors have focused largely on high-flying technology companies that have seen the largest corrections. Yet when you look more deeply at some stocks that momentum investors don't routinely follow, you can find some interesting insights. Today, for instance, T. Rowe Price Group (TROW 0.73%) is on the decline, and the asset manager's future is closely tied to the prospects for the broader stock market and the Nasdaq in particular.

Wall Street sign in front of New York Stock Exchange building.

Image source: Getty Images.

Managing a tough environment

Shares of T. Rowe Price were down more than 5% Wednesday morning. The investment manager released its preliminary year-end 2021 figures for assets under management, but it's hard to see a whole lot that's an obvious disappointment to justify the downward move.

T. Rowe Price finished the year with a total of $1.688 trillion under management. The money was split roughly 50-50 between traditional mutual funds and other vehicles, such as separate accounts and sub-advisory relationships. In total, assets under management were up 15% from the $1.47 billion of 12 months earlier.

Much of T. Rowe Price's assets are invested in the stock market. In the mutual fund realm, fully 64% of assets are in equities versus just 10% in fixed income, and much of the remaining 26% in multi-asset funds is likely held in stock as well. You'll find a similar breakdown on the separate account and sub-advisory side of the business.

T. Rowe Price's target retirement fund business also fared well. The company now boasts $391 billion in assets in such funds, up by 18% from the end of 2020. That reflected good performance from stocks.

Worries about the future?

Yet it's likely that the downward move came from concerns about the latest reading on inflation from the Bureau of Labor Statistics. That news was at least a little more positive than it has been in the recent past, but investors still seem to be concerned about the impact that higher interest rates and inflationary pressures could have on Wall Street and the investment community.

In addition, bad news from one of its peers could have hurt T. Rowe Price. Jefferies (JEF -1.54%) dropped 11% after announcing fiscal fourth-quarter results that fell well short of expectations. Even with a 20% dividend hike, Jefferies wasn't able to persuade shareholders that single-digit percentage gains in earnings for the quarter and a slight drop in revenue were things they could safely ignore.

T. Rowe Price in particular has substantial exposure to high-growth tech stocks, as it has routinely been among the earliest investors in some of the most promising start-ups even before they come public. If rising rates continue to hurt those small tech companies more than the rest of the market, then it could go against a key driver of the asset manager's business model that has boosted profits for decades.

After gains of 22,660% since the 1980s, T. Rowe Price has now fallen nearly 20% from its recent all-time highs. It's too early to call that a permanent top, but at least a few investors are starting to wonder whether T. Rowe Price's best days might be behind it.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns and recommends Jefferies Financial Group Inc. The Motley Fool has a disclosure policy.

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