| Fund Company | TD Asset Management |
| Fund Type | U.S. Equity |
| Rating | B |
| Style | Large Cap Growth |
| Risk Level | Medium |
| Load Status | No Load / Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | Larry Puglia since October 1996 |
| MER | 2.55% |
| Code | TDB 977 – No Load Units TDB 310 – Front End Units TDB 340 – DSC Units |
| Minimum Investment | $500 |
Analysis: As the name would suggest, the TD U.S. Blue Chip Equity Fund looks to provide long term growth by investing in medium and large sized “blue chip” companies that are located in the U.S. Managed by Larry Puglia of T. Rowe Price, the fund invests in stocks that have a market capitalization of at least $5 billion. Unlike other “blue chip” funds which tend to be more value focused, this one is managed using a more growth oriented process.
In building the portfolio, the T. Rowe Price team conducts a number of quantitative screens that look for companies that have exhibited high levels of revenue growth, are consistently growing earnings, and are generating strong levels of free cash flow. They then put the remaining companies through a more qualitative review that considers such things as quality of management, brand recognition and the soundness of the company’s business plan. The final step is to conduct a valuation analysis, ensuring that the stock is not overvalued compared with its growth prospects.
The end portfolio is deceptively concentrated, holding around 140 names with the top 10 making up a third of the fund. The portfolio is also very concentrated in consumer cyclical and technology names, which combined represent nearly 45% of the fund. Top holdings include such well-known brands as Google, MasterCard, Visa, and Amazon.com. Currency exposure is not hedged. Mr. Puglia is fairly patient in managing the fund, with a portfolio turnover rate that has averaged just over 46% per year.
Performance, particularly for a growth oriented fund has been strong, gaining 16.6% in the past five years, finishing in the first quartile and outpacing the S&P 500 Index’s 14.0% gain. So far this year, it is up 43% compared with a 38% jump in the index. Given the growth nature, it is slightly more volatile than both the index and the peer group. It also is likely to be hit harder in market downturns. In 2008, it dropped nearly 30% compared with the index’s decline of 23%, and in 2002, it dropped 26%, compared with the 23% fall in the index. But it also has the potential to bounce back nicely, gaining 18.6% in 2009, doubling the return of the index.
For investors looking for a growth oriented U.S. equity fund, this is a good fund to consider. It is best suited for those with a medium to high risk tolerance and a long term time horizon.