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T. Rowe Price's Chinese Coup


Asset manager T. Rowe Price Group (TROW) may be the first U.S. investment adviser to have a pivotal role in China's mutual funds, which have estimated assets of $300 billion. In June the largest and oldest of China's four mutual fund companies, China Asset Management, hired T. Rowe as a sub-adviser. Analysts say that role bolsters T. Rowe's appeal as a global asset manager. It manages no-load mutual funds for individuals and corporate pension plans with estimated 2007 assets of $402 billion, which are expected to grow to $557 billion in 2008, vs. 2006's $335 billion. Top stakeholders in T. Rowe are rivals Fidelity, Vanguard Group, and Barclays Global Investors (BCS). Douglas Sipkin of Wachovia Capital Markets (WB), who rates T. Rowe outperform, says the company has a "strong global equity mandate," and China Asset gives it a "long-term opportunity in the region." Its stock is up from 45 in January to 59 on Oct. 24. Over the past five years, it chalked up an average yearly gain of 37%, vs. the S&P 500's 15.5%. D.J. Neiman of William Blair, who rates T. Rowe outperform, says it is "our top pick in the group as the preeminent asset manager with sterling reputation and above-average growth opportunities" in the U.S. and international markets. T. Rowe has been catching up in China and India, he says, and should be a major player in Asia and other foreign markets.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

MEMC Electronic Materials (WFR) is one of the favored stocks on Wall Street: Of the 15 analysts who track the stock, 12 rate it a buy. It has rocketed from 35 a year ago to 65 on Oct. 24. But bad tidings may slow its advance. Of late, MEMC was at 62. A major supplier of polysilicon, the raw material used for solar panels, it is benefiting from the shortage of polysilicon and the boom in solar energy. The price of polysilicon sales has doubled since 2004. But Martin Sass of investment firm MDSass sold shares he bought at 38 early this year and is now shorting the stock. "I believe there is a massive bubble developing because of substantial new capacity coming on stream in a couple of years," he warns. Sass sees polysilicon prices plunging. Big suppliers are already cutting prices on their long-term contracts, says Sass.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them. For folks worried about getting older, Sirtris Pharmaceuticals (SIRT) may provide some comfort. It is developing drugs that could slow aging by activating SIRT1, one member of a newly discovered class of enzymes called sirtuins that control the aging process. CEO and co-founder Christoph Westphal says resveratrol, a natural substance in red wine and other plant products, activates SIRT1, resulting in calorie restriction without needing to cut normal caloric intake, which extended test animals' lives. Sirtris has many patents on the formulation of resveratrol. Its stock soared from 9 in June to 15 on Oct. 24. Michael King Jr. of Rodman & Renshaw (it owns shares), who rates Sitris outperform, says the stock will be driven by the flow of scientific data. Brett Holley of Oppenheimer rates Sirtris, a client, overweight. He sees a major partnership ahead.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.


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