uploads///T Rowe Price Blue Chip Growth Fund Vs Peers

TRBCX: What Can We Learn from Its Numbers?


Feb. 22 2016, Updated 11:07 a.m. ET

The T. Rowe Price Blue Chip Growth Fund: Overview

The T. Rowe Price Blue Chip Growth Fund (TRBCX) had $29.1 billion worth of assets under management at the end of January 2016. As of December 2015, its assets were spread across 129 holdings and included stocks of The Priceline Group (PCLN), McKesson (MCK), American Tower (AMT), Lowe’s Companies (LOW), and CVS Health (CVS). The fund’s top ten holdings formed 37.2% of its net assets at the end of December.

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The T. Rowe Price Blue Chip Growth Fund’s performance

From a purely NAV (net asset value) return standpoint, the TRBCX had a top-notch year up until February 12, 2016. This is not say that the fund posted positive returns for the period, but to indicate that it saw the smallest decline among the peer group in this review. It posted the highest returns in 2015, making it the top performer for the year as well.

Other metrics

The TRBCX’s standard deviation, or the volatility of returns, in the one-year period ended February 12 was 23.6%. This was much higher than both the S&P 500’s 16.4% and the peer group’s average of 18.6%. It also made it the most volatile fund for the given period. The case was the same for 2015, as its returns were the most volatile among those of its peer group

The fund’s risk-adjusted returns, calculated by the Sharpe ratio, amounted to -0.37, which was lower than the S&P 500’s -0.47 for the one-year period ended February 12. For 2015, the fund’s risk-adjusted returns stood in the middle of the pack of 12 funds.

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The information ratio, calculated with the S&P 500 as the benchmark, was -0.08 for the one-year period ended February 12—the lowest negative value among the peer group. The information ratio measures the fund manager’s consistency and ability to generate excess returns over a benchmark. However, we can’t evaluate a negative information ratio. For 2015, the fund’s information ratio was among the bottom three in the group.

A note to investors

The fund was among the top three alpha generators for 2015. For the one-year period ended February 12, it stood fourth in this department. The fund’s metrics look fine, but high volatility and a low information ratio for 2015 is a cause for some concern. However, numbers can only tell us so much, so investors would do well to evaluate the investment style of the fund manager to gauge whether the fund should make their shortlist. This analysis also shows how point-to-point returns don’t even convey half the story and how high volatility can be detrimental to a fund’s risk-adjusted performance. In the next article, we’ll look at the Invesco American Franchise Fund – Class A (VAFAX).


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