U.S. stocks powered ahead in 2014, the sixth consecutive year of gains, with the major equities indexes closing at or near record levels. Energy shares were the only laggards, stymied by sagging oil prices that put the commodity at its lowest level since May 2009. The broad move higher confirmed stocks' upward bias through most of the year. Results for non-U.S. stocks were wildly divergent, with Europe, Japan, and most emerging markets declining, and Chinese equities among the year's top performers.
The Growth Stock Fund returned 4.30% in the quarter compared with 4.78% for the Russell 1000 Growth Index and 4.55% for the Lipper Large-Cap Growth Funds Index. For the 12 months ended December 31, 2014, the fund returned 8.83% versus 13.05% for the Russell 1000 Growth Index and 10.34% for the Lipper Large-Cap Growth Funds Index. The fund's average annual total returns were 8.83%, 15.84%, and 8.75% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.69% 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 largest weighting in the portfolio was in the consumer discretionary sector, followed closely by information technology and health stocks. Industrials and business services composed another large component of the portfolio, and the sector overall contributed most to performance during the quarter. Health care and information technology were also strong performers. By far the major deterrent to results was the energy sector, as the group was pummeled late in the year by sharply declining energy prices. The portfolio's key holdings also disappointed us near year-end, after performing strongly earlier in the year. However, we remain optimistic about their ability to rebound in the months ahead.
We expect the environment for stocks to remain favorable in 2015, barring some exogenous event. China still poses some risk, and it is possible that the eurozone's sluggish economy and struggle with deflation will linger for longer than expected. On a positive note, we believe that commodities prices and inflation will remain contained, interest rates will stay low even allowing for some monetary tightening by the Federal Reserve, and the earnings outlook for various sectors appears promising. We are focusing on what we call "all-season" growth companies, those with the ability to grow earnings regardless of macroeconomic conditions. We are finding such companies in several areas, including health care, technology, and others, particularly after the sharp equities declines of the past few weeks. We believe that the portfolio's major stock positions have the potential to rebound in the months ahead, following weakness at the end of 2014.