Blue Chip Growth Fund managed by Larry Puglia had on average beaten the S&P 500 Index over
Question:
Blue Chip Growth Fund managed by Larry Puglia had on average beaten the S&P 500 Index over its 23-year history.
Task: assess the performance of the fund, consider the sources of that success, and decide on the sustainability of Puglia's performance.
Stock, bond, and money markets
Pension funds, mutual funds, hedge funds, and individuals.
Important Trends:
- 12.3% annual growth rate in dollars under management.
- 7.5% annual growth rate in the No.mutual funds.
- By 2015, 31% of stocks are owned by mutual funds.
- Dominated by institutions.
Capital market history
Technical analysis vs. fundamental analysis
Revisit efficient market hypothesis:
- Strong: Technical or fundamental analysis (×) index
investing
- Semi-strong: active searching for mispricing
- Weak: fundamental analysis () Alpha investing
Puglia's Performance
16% more wealth than the average investor
Beat the S&P 500 and large-growth indices on
average for the past 3, 5, 10, and 15 years.
Core competencies
Information and speed to market
Reputation
1. How well has the Blue-Chip Growth Fund performed in recent years? In making that assessment, what benchmark(s) are you using? How do you measure investment performance? What does good performance mean?
2. What might explain the fund's performance? To what extent do you believe an investment strategy, such as Puglia's explains performance?
3. How easy will it be to sustain Puglia's historical performance record into the future? What factors support your conclusions?
4. Consider the mutual-fund industry. What roles do portfolio managers play? What are the differences between fundamental and technical securities analysis? How well do mutual funds generally perform relative to the overall market?
5. What is capital-market efficiency? What are its implications for investment performance in general? What are the implications for fund managers, if the market exhibits characteristics of strong, semistrong, or weak efficiency?
6. 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? What belief about the equity markets does your answer reflect?
Fundamentals Of Investing
ISBN: 9780135175217
14th Edition
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk