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Why 2016 Has Been Bad for the T. Rowe Price European Stock Fund

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Performance evaluation of the T. Rowe Price European Stock Fund

The T. Rowe Price European Stock Fund (PRESX) has fallen 7.3% YTD (year-to-date). This places it among the bottom three funds in the group of 12 funds chosen for this review.

Across the periods plotted in the graph above, except for the one-year period, PRESX has been among the bottom three funds. In the one-year period, it’s placed eighth. We’ve graphed its performance against the Vanguard FTSE Europe ETF (VGK) and the iShares MSCI Eurozone ETF (EZU).

Let’s look at what has contributed to this fund’s poor performance YTD.

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Contribution to returns

Financials, the second largest of PRESX’s invested sectors, has been the biggest negative contributor to the fund’s returns YTD. Intesa Sanpaolo (IITSF) is the leading detractor from the sector, followed by Bank of Ireland. Credit Suisse Group (CS) and Royal Bank of Scotland Group (RBS) are also among its major negative contributors.

The consumer discretionary sector, which is PRESX’s topmost invested sector, has been the fund’s second largest negative contributor. William Hill, Greene King, and SKY have led the sector down, along with other stocks such as Liberty Global Class A (LBTYA). The information technology sector has been hurt by negative contributions from Wirecard and SimCorp. All holdings from the telecommunications services sector, including Vodafone Group (VOD), have weighed on the sector.

Materials stocks have been the biggest positive contributors in the year so far. Fresnillo has single-handedly led the sector up. Meanwhile, energy and consumer staples have contributed in equal amounts to the reduction of the fund’s overall negative showing. Royal Dutch Shell (RDS.A) and Eni (E) have fired for the energy sector.

All stocks in the consumer staples space have contributed positively to PRESX’s returns so far YTD. They’ve been led by Nestlé (NSRGF).

Investor takeaway

2016 is turning out to be quite a poor year for PRESX. Materials, energy, and consumer staples stocks have done well, but stock picks from other sectors have been disappointing. The fund has seen better days.

Those who have yet to complete their investment horizons may want to persist with the fund, though they may want to be careful about adding to their existing holdings.

New investors may not find PRESX appealing at this point in time, but they’ll want to consider its past performance and their investment horizons before deciding whether or not to invest.

We’ll look at the Franklin Mutual European Fund Class A (TEMIX) in the next article.

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