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A+ Award winner TD U.S. Blue Chip Equity Fund delivers growth with higher volatility
2/19/2018 4:27:01 PM
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DUE DILIGENCE
Objective research, analysis, and insight on investment funds in Canada from an acknowledged industry expert



By Dave Paterson  | Wednesday, January 17, 2018


 



TD U.S. Blue Chip Equity Fund is one of the “growthiest” U.S. equity funds around. It has also been one of the strongest performers in 2017, posting an impressive 25.5% return for the year. In comparison, the S&P 500 Total Return Index (C$) rose by 13.8%. That kind of performance garnered it the FundGrade A+® Award in 2012, 2013, and 2015.

The fund is diversified, yet concentrated, holding more than 135 names, while the top 10 holdings make up just under 40% of the assets. From a sector perspective, more than 70% is invested in just three sectors: technology, consumer services, and healthcare.

Fund manager Larry Puglia, of sub-advisor T. Rowe Price, looks for dominant players in their field, with above-average, sustainable growth prospects, and the ability to deliver and grow free cash flow. The fund invests in very large companies, most of which have market capitalizations in the upper quintile of the market. Its average market cap is more than 60% higher than that of the S&P 500.

Top holdings as of Dec. 31 included Amazon.com Inc. (NASDAQ: AMZN), Facebook Inc. (NASDAQ: FB), Microsoft Corp. (NASDAQ: MSFT), Alphabet Inc. (NASDAQ: GOOGL), and Alibaba Group Holding Ltd. ADR (NYSE: BABA).

Performance over the long-term has been excellent with the fund delivering a 5-year average annual compounded rate of return of 22, placing the fund in the first quartile of performance.

While the returns have been solid, this is not a fund for those with an aversion to risk. It has been significantly more volatile than both the market and peer group over all periods. For example, as of Dec. 31, it posted a 3-year average standard deviation of 15.58%, for a Fundata 3-year Volatility Ranking of 10/10.

One concern I have in the near term is its level of valuation. It is currently trading at levels well above the index. If you have held this fund for a while, you may want to consider taking some profits and reducing your exposure.

For those looking for a quality, growth-focused U.S. equity fund, this would be one to consider. It has a strong management team, uses a disciplined process, and boasts a strong track record. However, you must be comfortable with higher-than-average volatility.

TD U.S. Blue Chip Equity Fund
Fund company: TD Asset Management
Fund type: U.S. Equity
FundGrade Rating: B
Style: Large Cap Growth
Prospectus risk rating: Medium
Paterson risk rating: Medium-High
Load status: Optional
RRSP/RRIF suitability: Good
Manager: Larry Puglia since October 1996
MER: 2.45% (Advisor units)
Fund code: TDB310 (Front End Units)
Minimum investment: $500



Dave Paterson, CFA, is the Director of Research, Investment Funds for D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due diligence on a variety of investment products. He is also the publisher of Dave Paterson’s Top Funds Report, offering regular commentary and in-depth analysis of Canada’s top investment funds. He uses a unique analytical approach to identify funds with strong, risk-adjusted returns, and regularly publishes his insights and analyses in Fund Library.

Notes and Disclaimer

© 2018 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.

 

 

 
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