U.S. equities rose in the first quarter of 2013, lifting several major indexes to multiyear, if not all-time, highs. Share prices advanced as the economy continued to expand, the labor market improved somewhat, and the Federal Reserve persisted with its asset purchase plans to suppress interest rates and stimulate growth. Merger activity also raised investor sentiment, although sentiment was tempered by concerns that the European debt crisis would flare-up again. Cyprus temporarily closed its banks to prevent a run on deposits but finally agreed to a controversial bailout plan from the European Union and International Monetary Fund involving losses to some depositors.
The Growth Stock Fund returned 7.73% in the quarter compared with 9.54% for the Russell 1000 Growth Index and 8.17% for the Lipper Large-Cap Growth Funds Index. For the 12 months ended March 31, 2013, the fund returned 7.53% versus 10.09% for the Russell 1000 Growth Index and 7.04% for the Lipper Large-Cap Growth Funds Index. The fund's average annual total returns were 7.53%, 6.97%, and 9.24% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2013. The fund's expense ratio was 0.70% as of its fiscal year ended December 31, 2011.
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.
Most of the portfolio contains our highest-conviction growth stocks, but we have become slightly more defensive and diversified. The longer the current economic expansion lasts, the more likely we are to add to our defensive positions. We focus, as usual, on bottom-up stock selection rather than macroeconomic concerns to position the portfolio for the months and years ahead. We continue to favor U.S. housing stocks, where we find some of the best valuations. We added to key financial positions that should benefit because of cyclical factors, but we are generally neutral about the sector since we are challenged to find many opportunities there for above-average growth.
Considering the strong run in stocks during the past few months, we would not be surprised to see a short-term correction. That said, the positives outweigh the negatives in our view. The U.S. economy should continue to expand at a moderate pace with contained inflation, propelled by housing and growing strength in the labor market. The U.S. is in a good position relative to other developed markets. The industrials and business services sector is performing better, and Congress and the administration appear less contentious than at the end of last year. The Federal Reserve is likely to keep its stimulus programs in place a while longer. Eurozone risks remain with us, but they could decline in the months ahead. We rarely make dramatic changes to our investment strategies based on macroeconomic concerns. Rather, we prefer to focus on individual companies whose growth prospects seem promising. An expansion in multiples would add a boost to overall stock market performance.