September 14, 2012
|Larry Puglia, portfolio manager of the T. Rowe Price Blue Chip Growth Fund, identifies opportunities in the market's largest companies.|
Since its 1993 inception, the T. Rowe Price Blue Chip Growth Fund has outpaced its Lipper benchmark.1 Portfolio Manager Larry Puglia, who's managed the fund from its beginning, credits this success to T. Rowe Price's global research effort. The firm's team-first ethic belies the central role Puglia has played in developing and implementing the long-term, quality-conscious process that drives the fund's stock selection. We think that if you marry rigorous research with a logical methodology, consistently good results are achievable.
Puglia has a mechanical mind. Growing up in the small coal town of Waynesburg, Pennsylvania, he enjoyed fixing things. He spent his summers repairing cars, painting bridges, and working on a gas pipeline. I like taking things apart and putting them back together.
A strong interest in science led to him receiving the Bausch + Lomb Science Scholarship. Influenced by his father, an active investor, Puglia studied accounting and finance and graduated summa cum laude from the University of Notre Dame. He went on to analyze balance sheets and income statements during an auditing position at Peat Marwick and an internship in mergers and acquisitions at Salomon Brothers. He then earned his M.B.A. in finance and was named a Shermet Scholar at the University of Virginia's Darden School of Business, where his investing philosophy began to take shape.
Puglia's investment decisions begin with the research of roughly 200 T. Rowe Price analysts around the globe. He applies his own strict quality and growth criteria to their ideas, seeking blue chip companies that can maintain solid growth over long periods. We'd rather invest in a company that can consistently grow earnings 15% than one growing at a 30% rate that we don't think is sustainable.
His investment process emphasizes free cash flow, an unusual approach for a growth manager. Free cash flow typically is more important to value managers. But we've found over time that it's an especially good predictor of investment performance in high-growth areas like technology. Growth companies tend to have attractive opportunities in which they can invest whatever excess cash they generate.
Puglia also concentrates on the deployment of that cash. Puglia notes that he learned early in his career to focus on the quality of management after a few unsuccessful investments in companies with attractive prospects but flawed personnel. I discovered that there's no substitute for strong people. My father used to say, 'It's important not just to learn from your mistakes—you have to learn more quickly than the competition.' That's what I try to do.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, yield, and return will vary, and you may have a gain or loss when you sell your shares.
Because growth stocks have higher valuations and lower dividend yields than slower-growth or cyclical companies, the share price volatility may be higher. As such, fund prices could decline further in market downturns than non-growth-oriented funds.