Large-cap growth stocks declined in a challenging third quarter that started off strong but ended in a correction environment. During the period, the S&P 500 Index experienced its first 10% pullback since 2011, as China's economy (the second largest in the world) began to show signs of slower growth. The Federal Reserve's decision to delay a rate hike after its September meeting contributed to investor uncertainty and heightened volatility. Within the benchmark index, the utilities and consumer staples sectors held up the best, while the energy, materials, and health care sectors posted double-digit declines.
The Growth Stock Fund returned −4.71% in the quarter compared with −5.29% for the Russell 1000 Growth Index and −6.55% for the Lipper Large-Cap Growth Funds Index. For the 12 months ended September 30, 2015, the fund returned 6.47% versus 3.17% for the Russell 1000 Growth Index and 2.02% for the Lipper Large-Cap Growth Funds Index. The fund's average annual total returns were 6.47%, 15.19%, and 8.73% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.68% as of its fiscal year ended December 31, 2014.
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.
We focus on selecting high-quality, stable-growth companies that can perform well even if the global economy experiences only modest growth. We primarily invest in large-cap companies in what we view as the fastest-growing sectors of the market. Although the portfolio posted a third-quarter loss, stock selection and allocation decisions contributed to the portfolio's relative performance. At the end of the period, the portfolio was significantly overweight in the information technology and consumer discretionary sectors, which combined represented about 57% of the portfolio. Stock selection in both sectors contributed to relative results. Health care holdings generated poor performance; stock selection and an overweight allocation detracted from the portfolio's comparison with the benchmark. The portfolio's largest holdings are based on our time-tested, bottom-up stock selection, and we do not foresee making any significant shifts in these positions.
We remain constructive on the longer-term prospects for large-cap growth stocks. Markets continually exhibit volatility resulting from fear and provide us with opportunities to purchase equities that we believe are mispriced intrinsically relative to their long-term prospects. We will remain vigilant in taking advantage of these opportunities. The recent weakness in China's economy, falling energy and commodity prices, and the potential of a Federal Reserve interest rate hike remain significant near-term uncertainties for investors. However, we will attempt to use any market weakness to add to our highest-conviction ideas.