Jack Laporte insists that the concept of buying and holding good stocks will never die — in fact, it won't even fade away.
Jack Laporte insists that the concept of buying and holding good stocks will never die — in fact, it won't even fade away.
Mr. Laporte, who was manager of the small-cap T. Rowe Price New Horizons Fund for more than 22 years, turned over day-to-day management of the fund to Henry Ellenbogen last March. But he remains active at T. Rowe Price Group Inc., spreading his investment philosophy of holding on to winning positions — sometimes for more than a decade — to the next generation of managers.
"The idea is that my institutional knowledge can help some of the other portfolio managers," Mr. Laporte, 64, said in a recent interview with InvestmentNews.
He is also serving on T. Rowe Price's equity steering committee and its asset allocation committee.
Self-described as the "ultimate buy-and-hold guy," Mr. Laporte relishes the fact that the New Horizons Fund has had an average annual turnover rate of just 25% for the last 10 years, compared with 115% to 120% for similar funds.
"My average hold was four years, while the average portfolio manager [held for] about 10 months," he said. "I don't know how others can make that a successful way to manage money."
Mr. Laporte’s near-passive style of active management has added value for shareholders, he said.
Since September 1987, when he began managing the fund, he has achieved a 9.85% compound annual return, versus 5.3% for the Russell 2000 Index, according to T. Rowe Price.
"In the small-cap area in particular, where things are still much less efficient [than larger stocks], intelligent active management can add value," Mr. Laporte said.
By leaving small-cap winners be, the New Horizons Fund ends up being somewhat concentrated: The fund's top 10 holdings make up about 25% of the portfolio, the largest being Henry Schein Inc. at about 3.5%.
"But as the saying goes, small caps either grow up or blow up," Mr. Laporte said. "So to diversify against that, we've historically kept a large list, about 250 names" in the fund, he said.
"I've always believed in having a long tail of smaller positions, where I've seeded the portfolio with companies where I've gotten to know managements and understand their business models over a number of years," he said. "Once I was comfortable, I would take the position up over time."
Mr. Laporte knows that other portfolio managers have their own unique styles for managing money.
"But I try to give my perspective on how growth investors should operate," he said. "Most people know that I'm on the extreme of a buy-and-hold strategy, but most people know it's worked very effectively for me over time."
