Performance evaluation of the T. Rowe Price European Stock Fund
So far, 2016 has been an utterly forgettable year for the T. Rowe Price European Stock Fund (PRESX). Except for one month, the fund has figured among the bottom three performers for all periods shown in the graph below. It stands dead last in both the YTD and one-year periods among the 12 funds chosen for this review. We have graphed its performance against two ETFs: the Vanguard FTSE Europe ETF (VGK) and the iShares MSCI Eurozone ETF (EZU).
Let’s look at what has contributed to this forgettable performance by the fund in YTD 2016.
Contribution to returns
Financials, the second-most-invested sector by PRESX, has been the biggest negative contributor to the fund’s returns in YTD 2016. Intesa Sanpaolo S.p.A. (IITSF) is the leading detractor from the sector, followed by Bank of Ireland. Credit Suisse Group AG (CS), Royal Bank of Scotland Group plc (RBS), and Aviva plc (AV) also find themselves among the detractors.
The consumer discretionary sector, which is the most invested by PRESX, is a distant second to financials but a major negative contributor nonetheless. Greene King, Sky plc, and William Hill plc have led the sector down, along with other stocks like Liberty Global plc – Class A (LBTYA).
Industrials and telecom services follow the discretionary sector. Capital Plc is head and shoulders above all negative contributors from the sector. Meanwhile, telecom services has been led down by Vodafone Group Plc (VOD) and Telefónica Deutschland Holding AG.
Materials have been the biggest positive contributors in the year so far. Fresnillo Plc has single-handedly led the sector up. Energy and consumer staples follow materials, in that order. Royal Dutch Shell plc (RDS.A) has nearly single-handedly provided all the gains from the energy sector, with Eni SpA (E) contributing as well. Meanwhile, consumer staples have been led by Nestle SA (NSRGF).
PRESX has had nothing worth remembering in 2016 so far. It has tailed all its peers in this review as well as all major passively managed funds focused on European equities. Its stock picks across sectors have disappointed and its portfolio turnover is relatively high.
Due to much better performance in the past, those investors who have not yet completed their investment horizon can persist with the fund. Meanwhile, new investors may not find PRESX appealing at this time.
We’ll look at the Franklin Mutual European Fund – Class A (TEMIX) in the next article.