After stumbling in early April, U.S. stocks continued their upward trajectory and posted gains in the second quarter of the year. Stocks advanced despite the troubling environment characterized by escalating violence in various corners of the globe, including Russia's seizure of Crimea, slowing growth and credit concerns in China, mixed U.S. economic data, and most recently, an eruption of sectarian violence in Iraq. Stock performance was fairly uniform, with no clear leadership emerging among growth and value shares.
The Growth Stock Fund returned 4.03% in the quarter compared with 5.13% for the Russell 1000 Growth Index and 4.32% for the Lipper Large-Cap Growth Funds Index. For the 12 months ended June 30, 2014, the fund returned 28.68% versus 26.92% for the Russell 1000 Growth Index and 28.07% for the Lipper Large-Cap Growth Funds Index. The fund's average annual total returns were 28.68%, 19.63%, and 8.91% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2014. The fund's expense ratio was 0.69% as of its fiscal year ended December 31, 2013.
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An underweight and stock selection in energy hindered the portfolio's performance, but health care holdings were beneficial. We are focusing on companies that can grow earnings at double-digit rates, in our view. We like companies that are involved in the convergence of computing to communications; companies in the exploration and production of oil and gas shale in the U.S.; firms in the health care sector that are addressing unmet clinical needs, particularly in the biotech industry; aerospace manufacturers and suppliers; and companies participating in nonresidential construction, including roads and infrastructure.
We don't expect to see a repeat of the expansion in price/earnings multiples that drove stocks last year. Stocks are more likely to be influenced by corporate earnings growth, which we think will continue at a moderate pace through the rest of the year. Valuations are reasonable from a historical perspective, and stock market performance should be more or less in line with the rate of earnings growth. We believe that the bull market that has been taking place over the past five years has further room to run. In many instances, a sharp decline such as the one we witnessed in 2008 has led to a sharp V-shaped, shorter-lived recovery. Stocks have advanced at a more moderate pace since spring 2009, however, which leads us to the view that the upturn in stocks has not yet run its course.