U.S. stocks rose modestly in the second quarter. Both the large-cap S&P 500 Index and the Dow Jones Industrial Average repeatedly hit record highs as investors anticipated that an improving economy would sustain corporate earnings growth. Growth and value stocks in the large-cap universe performed roughly the same. Energy was the top-performing sector in the S&P 500, gaining more than 12%, as oil prices surged amid geopolitical turmoil in Ukraine and Iraq. Utilities and information technology stocks followed with more modest gains. Financials, followed by consumer staples stocks, rose the least.
The Capital Opportunity Fund returned 5.28% in the quarter compared with 5.23% for the S&P 500 Index and 4.51% for the Lipper Large-Cap Core Funds Index. For the 12 months ended June 30, 2014, the fund returned 24.66% versus 24.61% for the S&P 500 Index and 23.38% for the Lipper Large-Cap Core Funds Index. The fund's average annual total returns were 24.66%, 18.07%, and 7.80% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2014. The fund's expense ratio was 0.71% as of its fiscal year ended December 31, 2013.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The fund aims to outperform the S&P 500 Index by investing in our research analysts' high-conviction stocks while keeping sector and industry weightings in line with the index. Stock selection in the utilities sector contributed the most to relative results, followed by health care. Conversely, stock selection in the consumer staples and financials sectors detracted the most from relative performance. Eight of 10 sectors in the S&P 500 Index helped relative returns for the quarter, while two sectors detracted.
Improving payroll trends, declining unemployment, and other data indicate that the U.S. economy has recovered after a surprise contraction in the first quarter. Still, we remain concerned that the stock market's rally may have outpaced corporate fundamentals and the health of the overall economy. We also believe the market is due for a pullback as it has been some time since we have seen a meaningful correction. Looking ahead, companies will need to deliver solid earnings and revenue growth to achieve further gains, especially as the Federal Reserve winds down its longstanding stimulus program. We continue to rely on in-depth fundamental research to seek companies with the most promising prospects for capital appreciation. We believe that an actively managed portfolio of carefully selected stocks, with overall risk characteristics similar to those of the S&P 500, can outperform the index over time.