Introducti

on
 Managed the T.Rowe Price Blue Chip
Growth Fund for over 23 years (2016)

 Generating superior average returns

over the fund’s life since 1997
(average annual total return 10.12%,
outperforming benchmark 9.12%)

 Morningstar gave the Blue Chip

Growth Fund its second-highest rating,
four stars for overall results, putting it Larry Puglia
in the top 32.5 % of 1,482 funds in its
category. Born 1960 in
Waynesburg, Pennsylvania
 01
Question 1
What is the efficient market hypothesis?

What does it imply for the performance of mutual

funds?
3 Types of the efficient market
hypothesis
WEAK SEMI-STRONG STRONG

• Current stock price are • Stock price is the factor • Stock price always
reflecting all market of all public information. reflect the entirety of
information. both public and private
• ignore the usefulness of information
• Past performance is technical and
no guarantee of future fundamental analysis. • The available
results. information is useless
• Technical and to obtain return.
• Technical trading Fundamental analysis
strategies cannot strategy cannot be used
provide consistent to obtain return.
assess.
• According to the EMH theory, it is impossible for mutual
fund to always generate profit from the market.

• In realistic, we cannot find any superior fund managers

who can consistently beat the market. It is depend luck or
unluck of the investors.

• Therefore, the fundamental and technical analysis for

mutual fund are useless. This is because all investors have
the same information and achieve the same return.

For example, in June 1967, Forbes magazine made an randomly select stocks by
throwing dart at a dartboard and he concluded that it seemingly luck is all that it and
EMH stands to explain all this.
 02
Question 2
How well has the Blue Chip Growth Fund performed in recent
years?

In making the assessment, what benchmark(s) are you

using?
2.0 How well has the
Blue Chip Growth Total performance of
Fund performed in the fund
recent years?

The of Blu
e Chip
Growth F Overview of
und can
be consid
and out
er well Morningstar
performa
nce

The total distribution

and NAV of the fund
  For the 10 year
performance, the return will

Performance of be
24,154 – 10,000 =
Fund 141.54%

 For the 5 year performance,

the return will be
19,639 – 10,000 =
96.64%

 For the 3 year performance,

the return will be
14,930 – 10,000 =
49.93%
 Overview of
Morningstar

 Awarded the Blue Chip Growth Fund 5 star rating for the fund 5 year performance

 Morningstar has placed the Fund in top 10% out of 1285 mutual funds investing in
large capitalization growth stock

 Recognized as an IBD Best Mutual Funds 2016 Awards winner

The total distribution and NAV
of the fund

 Both of the NAV and Distribution Total increase

 It means the fund have the ability to perform well and made the investor
more confidence.
 Performance of the
2.1 In making Blue Chip Growth Fund
compare to Large
the Growth Fund and S&P
500
assessment,
Trailing total returns of
what the Blue Chip Growth
Fund compare to Large
benchmark(s) Growth Fund and S&P
500
are you
using?
Performance of The growth of fund is higher than

the TRBCX others.

compare to Example :

Large Growth 10,000 USD invest,

initial of June 2006 and hold until June
Fund and S&P 2016, the highest of return generated is

500 from TRBCX.

TRBCX - 24,101.23 USD
S&P 500 - 20,644.18 USD
Large Growth Fund - 19,527.63 USD
 Trailing Return
Trailing total
3 year 5 year
returns of the
Blue Chip Growth 14.29% 9.22%
Blue Chip Growth Fund

Fund compare to Large Growth Fund 11.13% 7.52%

Large Growth S&P 500 11.46% 7.53%

Fund and S&P 500

The higher the trailing return, indicate the
more performance they made and attrative
to these investors.
How do you
measure
investment
The money you
performance?
make or lose in
an investment
(Change in value +
Income)
÷ Investment amount
= Percent return
 03
Question 3
What would Puglia say in response to the claim that
his success is luck?
3. What would
Puglia say in
response to the
claim that his Existence of
success
3 formsisof
luck?
EMH anomalies
- Weak Form
• whereby stocks can deviate from
- Semi-strong
their fair market values.
- Strong Form
• low P/E ratio stocks tend to have
Impossible to outperformed by
either fundamental or technical better performance compare to
analysis high PE stocks in the long run
Behavioural
Finance
Market participants are Greed, fear and panic
not always rational are the important factors
that determine stock
prices

Participants in the stock For example, , Internet

market could impact the bubble in the 1990,
stock price in the market 2007-2009 Global
Financial Crisis
Puglia’s
Investment
 Identifying
Style?
with EPS growth
and for a long-term period.

 Growing market share and

market size.

 Competitive advantage and

strong fundamentals.

 Seasoned management with

demonstrated track record
 04
Question 4
Suppose that you are an advisor to wealthy
individuals in the area of equity investments. In 2016,
would you recommend investing in Puglia’s Blue Chip
Growth Fund and why?
 Reason to invest in
Puglia’s Blue Chip Growth Fund
Professional
Management
Team
Fund had
Fund had
Diversificatio
Diversification performed
performed well
n wellthe
over over the
years
years
Global
Global
research
research team
team
Puglia
Pugliahas his
has
hisown
own
philosophy of
philosophy
investment
of
investment
Fund performed well
Since 1997, through 2016, it had
generated an above average annual
total return of 10.12%, the result
even outperforming the S&P 500 at
9.12%.
Puglia’s philosophy of
investment
Laying the fund’s standard on stock
selection
Global research team
The formation of a highly regarded
global research team - determines
the effectiveness of fund
management
Diversification
- To allocate assets into different
investment portfolios to diversify its
risk.
- Puglia’s Blue Chip Fund carefully
sorted its stock selection, with a
coverage of sector wide and across
industries, in case of economic
turmoil, the stocks are left with
better defense.
Professional management
teams
Allowing individuals to go about
their daily lives without spending
too much time on the aggravating
subject of what to buy and sell.
 Conclusion
EMH
Ever since the theory of EMH was made to
known since 1970, the theory is still relevant
today.
Rise of computerized systems
- Investments becoming automated,
fundamental analytic is easy to generate.
- Computers can immediately process any
available information.
- Translate into immediate trade execution.
EMH may be true, but investors
may not always rational
- Behavioral science – human emotions such
as fear, love, hate, pleasure or pain.
- Decision-making is still done by human
beings – subject to human.
Because of that, Puglia’s Fund are
able to stand out
- With professional skills, relentless and
detailed research.
- It is not impossible for mutual fund to earn
a place in the world of investment.
Puglia’s Growth Fund was not
success without a reason.
- Has shown many essential qualities before
engaging an investment.
- Not only fundamental analysis, but he
inspected the company inside out.
- This include the company’s product as well
as its operation and management.
- Although the market is efficient, given the
effort, there is still room for profits.
Thank
you for
listening!