CASE STUDY 1 PRESENTER:

GROUP 1 (1) CHAN JIA FEI,

(2) NG YEW SHENG,

(3) THAM MING KE,

(4) YEAP YEE SHEN,

(5) LAKSHMAN A/L

PARAMNATHAN
Introduction

Larry J. Puglia
• Hired by T.Rowe in 1990
• An outstanding fund manager who
perform high average of interest
• Average yearly return : 10.12 %
 1) What is the efficient
market hypothesis?

• Efficient Market Hypothesis (EMH) is a theory that

signal that it is impossible for investor to gain profit
in the stock market by using fundamental analysis
or technical analysis

• All of the market value of the securities will truly

reflect the intrinsic value of the securities
The efficient market • Weak form EMH: Current market price
hypothesis can be further reflect all security-market historical
information, including the historical sequence
classified into three form of prices, rates of return, trading volume data,
and other market-generated information

• Semi-strong form EMH: Current market

price will reflect all the available public
information

• Strong-form EMH: It stated that the current

market price reflects all the price information
no matter publicly or privately available
information
 1.1 What does it imply for the
performance of mutual funds?

• Mutual fund can make use of the

diversification strategy and hold difference
securities in order to diversify the risk in one
security

• This is the reason of why Puglia can be

outperforming every year since it has huge
capital and he diversify the risk as much as he
can
2) How well has the Blue-Chip Growth
Fund performed in recent years? In
making the assessment, what
benchmark(s) are you using? How
do you measure investment
performance?
 Performance in Recent years

  Growth rate per year(%)

Year 2011 2012 2013 2014 2015

TRBCX 1.50 18.41 41.57 9.28 11.15

S&P 500 2.11 16.00 32.39 13.69 1.38

Table 1: Growth Rate from 2011 to 2015 for TRBCX and S&P 500
 Performance in Recent years
  Performance

Duration 1 month 1 year 3 years 5 years 10 years

TRBCX growth 10,357 10,088 14,930 19,639 24,154

of 10,000 ($)

Table 2: Performance of 10,000$ growth rate in 1 month, 1 year, 3 years, 5 years and 10 years
 Performance in Recent years

  Average Return per year (%)

Duration 1 year 3 years 5 years 10 years 15 years

TRBCX 0.88 14.29 14.45 9.22 6.27

S&P 500 3.02 11.46 12.81 2.53 5.53

Table 3: average return per year in 1 year, 3 years, 5 years, 10 years and 15 years
 Benchmark
BenchmarkUsed
Usedfor
forAssessment
Assessment

Morningstar,
Morningstar,aa
Historical
Historical
performance
financial
financialservices
services S&P 500
S&P 500
performance firm
firm
Measurement of Investment performance

Net asset • dividing its assets minus its liabilities by the

number of outstanding units
value • assists investors in determining the fund

Annual • evaluates a fund's performance over time

• used to compare it to the performance of other
total return funds
3. What would Puglia say in response to the claim that his success is
luck? What is his investment style?
Criteria of the stock selected
Market Position
• Good opportunities in the growth of market share and size
• Cost advantage

Strong Fundamental
• Achieve above average earning growth
• Increasing margin, strong free cash flow and increasing return on equity

Good Management
• Manage the capital efficiently
• Allocate the company capital
Resources provided by T.Rowe Price

 The use of highly skilled global research

team that included more than 250 industry
analysts and portfolio managers
 Analyse more than 2,300 public listed
companies around the world
 Speed up the screening process
 What is his investment style?
o Passive Investing

 Buy and hold investing strategies

 Looks for the companies that have
potential to grow above the average
earnings
 Reduce transaction costs and tax
4.0 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?
 
Yes, We will recommend investing in Puglia's Blue Chip Growth Fund:
 
a) Suitable for risk adverse investor
 Long term investment - to obtain higher return
 Long term capital growth - proven return of 10.12% a year
outperforming the benchmark of 9.12% in &P 500 index.

b) Invested in large and medium size well established companies

 High potential for above-average long-term growth potential, significant
free cash flow, and capital allocation expertise.
 Well-balanced portfolio, help investor focuses on businesses with
significant growth potential.
c) Puglia choose strong fundamentals companies
 Companies having good ROE and low liquidity risk
 Blue-Chip Growth Fund's high rating imply - low-risk
investment with above-average returns compared to S&P 500
and Large Growth Fund performance.
 
d) Select Companies with a growing market share and market
size
 Establish platform for investors to diversify their portfolios by
investing in a variety of securities from various industries,
lowering investment risk
 
Backed by professional research team
 More than 250 industry analysts and portfolio managers assisting Puglia
 Research team covered more than 2,300 public companies around the globe (two-third of the global
market)

Analysts over the course Puglia 24-year career

 Put research findings and recommendations of the research team to good stock selection process.
 Focus on finding firms with sustained free cash flow growth with help of the research team and strong
corporate resources.
 
Conclusion:
 Recommend investors to invest long term - Puglia’s Blue Chip Growth Fund 2016 – for higher
returns.
 Fund's long-term viability and market-beating history & Puglia's investment experience - Blue-Chip
Growth Fund weather the future market storms and maximize investors' wealth