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July 13, 2010, 8:08 a.m. EDT

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By JOHANNA BENNETT

EUROPE IS IN TURMOIL. China may be facing a slow down. And the U.S. stock market's second-quarter slide suggests analysts are less sanguine about what they see ahead.

Nevertheless, Larry Puglia, manager of the $10 billion-in-asset T. Rowe Price Blue Chip Growth Fund /zigman2/quotes/208533233/realtime TRBCX +0.98% (ticker: TRBCX), says there are big companies still capable of delivering double-digit earnings growth.

As the fund's name suggests, the veteran portfolio manager looks for brand-name, large-cap companies able to translate their competitive advantage into steady growth. But he avoids highly economically sensitive firms in favor of stable industrial firms, innovative technology companies, and financials with strong balance sheets.

Barrons.com chatted with Puglia recently about corporate earnings and the growth opportunities he sees.

Manager's Bio Name: Larry Puglia
Age: 49
Title: Manager of the T. Rowe Price Blue Chip Growth Fund
Education: BA in accounting, University of Notre Dame; MBA, Darden School of Business at the University of Virginia
Hobbies: Puglia is learning to play the guitar. He also enjoys golf, running and cycling.

Barrons.com: As the second-quarter corporate earnings season gets under way, analysts seem relatively optimistic despite the stock market's recent pullback. Is that warranted?

Puglia: Second-quarter earnings should prove satisfactory, and for some companies may exceed expectations. The problem is what lies ahead. The economic turmoil in Europe and China's growth prospects are big concerns. And with most major industrialized countries running large budget deficits, they may decide to rein in stimulus spending, which could stall the economic recovery under way.

Q: Are the consensus estimates for the Standard & Poor's 500 of roughly $82 a share in 2010 and $96 next year realistic?

A: Those expectations look ambitious, and I wouldn't be surprised if they were trimmed moderately. I am of the view that we'll have an economic recovery, but it will be a muted one.

Q: If that's the case, are there any attractive growth stocks?

A: To generate durable and sustainable growth in earnings and free cash flow requires a strong market position, a seasoned management skilled at allocating capital and strong financial fundamentals. The economy is challenging and the market is choppy, but there are still plenty of companies capable of producing strong earnings growth into the next calendar year. Among them are Danaher /zigman2/quotes/210555154/composite DHR -0.26% (DHR), Emerson Electric /zigman2/quotes/200181610/composite EMR +4.46% (EMR), Apple /zigman2/quotes/202934861/composite AAPL +0.36% (AAPL), 3M /zigman2/quotes/205029460/composite MMM +2.74% (MMM), Wells Fargo & /zigman2/quotes/203790192/composite WFC 0.00% Co. (WFC) and American Express /zigman2/quotes/203805826/composite AXP +2.36% (AXP).

Fund Facts T. Rowe Price Blue Chip Growth Fund /zigman2/quotes/208533233/realtime TRBCX +0.98% (TRBCX)
Assets: $10 billion
Expense Ratio: 0.81%
Front Load: None
Annual Portfolio Turnover: 60%
Yield: 0.12%
Source: Morningstar.com as of July 7, 2010

Q: As of March 31, your fund's three top holdings were Apple, <PHRASE TYPE="COMPANY" NAME="GOOG" SIGNIFICANCE="PROMINENT" BACKGROUNDINFO="BRIEFING-BOOK">Google<SYMBOL WSJTYPE="COMPANY" TICKER="GOOG" COUNTRY="US" DJTICKER="GOOG">GOOG</SYMBOL></PHRASE> (GOOG) and <PHRASE TYPE="COMPANY" NAME="AMZN" SIGNIFICANCE="PROMINENT" BACKGROUNDINFO="BRIEFING-BOOK">Amazon.com<SYMBOL WSJTYPE="COMPANY" TICKER="AMZN" COUNTRY="US" DJTICKER="AMZN">AMZN</SYMBOL></PHRASE> (AMZN). What do they have in common?

A: All three companies have strong free cash flow and lots of cash on their balance sheets, and grew their earnings quite nicely during the economic downturn.

/zigman2/quotes/208533233/realtime
US : U.S.: Nasdaq
$ 151.76
+1.47 +0.98%
Volume: 0.00
Aug. 5, 2020
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/zigman2/quotes/210555154/composite
US : U.S.: NYSE
$ 205.54
-0.53 -0.26%
Volume: 2.08M
Aug. 5, 2020 4:03p
P/E Ratio
50.70
Dividend Yield
0.35%
Market Cap
$146.19 billion
Rev. per Employee
$280,183
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/zigman2/quotes/200181610/composite
US : U.S.: NYSE
$ 64.69
+2.76 +4.46%
Volume: 3.18M
Aug. 5, 2020 4:03p
P/E Ratio
20.20
Dividend Yield
3.09%
Market Cap
$37.00 billion
Rev. per Employee
$202,731
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/zigman2/quotes/202934861/composite
US : U.S.: Nasdaq
$ 440.25
+1.59 +0.36%
Volume: 30.50M
Aug. 5, 2020 4:00p
P/E Ratio
33.46
Dividend Yield
0.75%
Market Cap
$1875.55 billion
Rev. per Employee
$1.98M
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/zigman2/quotes/205029460/composite
US : U.S.: NYSE
$ 155.35
+4.14 +2.74%
Volume: 2.72M
Aug. 5, 2020 4:02p
P/E Ratio
17.61
Dividend Yield
3.79%
Market Cap
$87.10 billion
Rev. per Employee
$350,368
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/zigman2/quotes/203790192/composite
US : U.S.: NYSE
$ 24.30
0.00 0.00%
Volume: 0.00
Aug. 5, 2020 7:00p
P/E Ratio
27.77
Dividend Yield
1.65%
Market Cap
$99.78 billion
Rev. per Employee
$392,114
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/zigman2/quotes/203805826/composite
US : U.S.: NYSE
$ 95.39
+2.20 +2.36%
Volume: 2.85M
Aug. 5, 2020 4:02p
P/E Ratio
19.76
Dividend Yield
1.80%
Market Cap
$75.03 billion
Rev. per Employee
$733,559
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/zigman2/quotes/208533233/realtime
US : U.S.: Nasdaq
$ 151.76
+1.47 +0.98%
Volume: 0.00
Aug. 5, 2020
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