A fund with big bets on banks

By Carla FriedAugust 3, 2010: 8:43 AM ET
(Money Magazine) -- Manager Brian Rogers's knack for spotting
promising but beaten-down stocks has helped T. Rowe Price Equity
Income outpace more than 75% of its peers over the past 10 and 15
years. And since the March 2009 market lows, this $17.6 billion
portfolio has soared 80%, vs. 56% for the S&P 500 index.

That was partly due to the fund's big -- and some would say risky --
bets on problem-plagued financial shares. But now that those stocks
have rebounded, can Rogers continue his remarkable run?
An investment in Equity Income has trounced other market bets over
the long run.

Brian Rogers, 55, has been calling the shots at Equity Income longer
than some of his firm's employees have been alive. His 25-year tenure
is nearly five times as long as his average peer's, and it includes
three recessions, four bear markets, and an epic financial crisis that
is still playing out. Throughout that stretch, Rogers -- who is also
chairman and chief investment officer of T. Rowe Price -- has managed
to beat most large-cap value funds as well as the S&P 500.
"He cycles in and out of companies he has followed for years," says
Morningstar fund analyst Harry Milling. "He knows the managements so
well. That's experience you can't buy."

Despite the huge gains financial shares have enjoyed, this fund isn't
ready to sell yet. During the depths of the mortgage meltdown, when shares of a number of
blue-chip financial companies lost two-thirds or more in value, Rogers
was adding to Equity Income's stake in names like Bank of America
(BAC, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), and American
Express (AXP, Fortune 500). Since then, his dark-day bets have more
than tripled. Despite that, Rogers isn't looking to trim his financial
stake just yet.

"Financials have gone from severely depressed to just somewhat
depressed," says Rogers. "We are still early in the game."
Isn't he concerned that Europe's debt crisis could trigger another
global credit panic? "The magnitude of what we are seeing now," he
says, "is far less than what we just came through."
At times Equity Income ventures into sectors that its peers often

Rogers is a classic value manager, who seeks out stocks that are
trading below what he thinks the underlying companies are actually
worth. But unlike some of his peers, who tend to stick to traditional
value sectors such as financials and energy, Rogers is willing to go
wherever he thinks the opportunities are.

That means his portfolio can at times be a bit eclectic. For example,
after the Internet bubble burst in 2000, Equity Income made some bets
on technology stocks (like Hewlett-Packard (HPQ, Fortune 500)) that
were beaten down.

Today his fund has small positions in tech stocks including Applied
Materials (AMAT, Fortune 500) and eBay (EBAY, Fortune 500). That's
classic Rogers: being willing to go where most of his value peers fear
to tread.
Source: CNN.Com