Q–I’m a 66-year-old retired woman with $20,000 invested in mutual funds, including T. Rowe Price Blue Chip Growth Fund. Should I stick with this fund?
A–It’s competent enough, though you’ll need more than just blue chips to construct a strong overall portfolio.
The $2.15 billion T. Rowe Price Blue Chip Growth Fund gained 27.99 percent over the past 12 months to rank just below the midpoint of large-capitalization funds offering a blend of value and growth. More impressively, its three-year annualized return of 27.78 percent placed it in the top 6 percent of its peers.
“While I generally prefer to buy index funds to cover the large-capitalization stock sector, this fund is clearly doing better than the index,” observed Sheldon Jacobs, editor of The No-Load Fund Investor newsletter, which recommends the fund.
The only question, Jacobs believes, is whether your overall portfolio is diversified enough in other areas as well. You should probably be emphasizing small-cap and mid-cap stocks right now because large stocks such as those represented in this fund may be comparatively overvalued, he cautioned.
The fund recently had 91 percent of its portfolio in stocks and the rest in cash. The largest stock groups were financial, technology, industrial cyclical and health care. The top stock holdings were Allied Signal, ACE, Travelers Group, Merck, Pfizer, Chase Manhattan, Mellon Bank, Tyco International, Citicorp and Philip Morris.
Larry Puglia has been manager of the fund for the past four years, which Jacobs considers a plus. This “no-load” (no initial sales charge) fund based in Baltimore requires a $2,500 minimum initial investment.
(The No-Load Fund Investor, P.O. Box 318, Irvington-On-Hudson, N.Y. 10533, costs $129 for a one-year subscription; $149 including “The Handbook for No-Load Fund Investors”).
Q–In 1993 I began acquiring stock in Engelhard Corp., based on its catalytic converter activity. I now have more than 400 shares. The dividend has been raised and the salaries and benefits of the chief executive officer and the board continue to rise, but the stock price keeps going down. Is it time to pull the plug?
A–The company feels your pain.
Engelehard, famous for its specialty chemical catalysts, engineered products and procurement of precious metals, has been busily restructuring in response to shareholder complaints such as yours.
It will record fourth-quarter charges of about $96 million after taxes, or 67 cents per share, tied to restructuring at three of its operations. This includes the “mothballing” of a facility for manufacturing fluid cracking catalysts in the Netherlands and the restructuring of a venture with ICC Technologies Inc.
In light of these moves, the consensus recommendation from analysts covering Engelhard stock is currently a “buy,” according to the I/B/E/S International research firm. That includes one “strong buy,” two “buys” and three “holds.”
The firm’s projected earnings growth rate for this year is 8.7 percent versus a decline of 3.1 percent for its overall industry. Next year’s projected growth rate of 17.1 percent compares to a 53.8 percent gain industrywide. Engelhard’s five-year growth expectation is 14.5 percent.
Aside from those problems in its basic business ventures, the compay suffered public embarrassment last fall.
A former Engelhard executive admitted in federal court that he stole $12.5 million from the company through phony invoices so he could amass a collection of antique clocks. The $7.2 million subsequently raised at auction from the sale of those clocks and the sale of the former executive’s home went toward repaying Engelhard’s insurance company for the loss.
Q–I retired in 1992 after 43 years of service with my company, leaving my 401(k) invested there in a conservative plan. I’ll be 70 years old in November and soon thereafter will begin to take distributions on the 401(k). Is there any reason for me to roll over my 401(k) into an IRA, or can I just leave it with my company?
A–Your decision depends largely on the quality of your company plan. In general, today’s typical 401(k) is much more sophisticated that it was in the past.
Keep in mind that rolling your assets out of your corporate 401(k) and into a self-directed IRA will have absolutely no impact on your mandatory distributions at 70 1/2 years of age, said David Evans, executive vice president of The Scarborough Group in Annapolis, Md.
“Apart from that issue, you really can’t take a broad brush approach as to whether you should roll your money out,” Evans added.
These days, if your corporate 401(k) has a reasonably good universe of mutual funds and other investment choices, as most do, and you’re basically happy with what’s being offered, there’s no compelling reason to roll your money over.
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Andrew Leckey, an anchor on the CNBC financial cable television network, answers questions only through the column. Address inquiries to Andrew Leckey, “Successful Investing,” Suite 367, 76 N. Maple Ave., Ridgewood, N.J. 07450 or by e-mail at successinv@aol.com.
