Global technology stocks posted a good gain in the fourth quarter, due mainly to strong performance in the U.S. Most non-U.S. stock markets posted fourth-quarter losses in U.S. dollar terms due to the further weakening of non-U.S. currencies, particularly the euro and the yen. Semiconductors, telecommunication services, and hardware stocks fared best among the major segments, while media shares suffered a loss.
The Global Technology Fund returned 3.50% in the quarter compared with 4.04% for the MSCI All Country World Index Information Technology and 3.71% for the Lipper Global Science / Technology Funds Index. For the 12 months ended December 31, 2014, the fund returned 23.99% versus 15.73% for the MSCI All Country World Index Information Technology and 12.15% for the Lipper Global Science / Technology Funds Index. The fund's average annual total returns were 23.99%, 20.07%, and 13.30% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.95% as of its fiscal year ended December 31, 2013.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
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While we continue to believe some semiconductor companies are well positioned over the longer term to benefit from global adoption of smartphones and tablets, as well as the increasing use of semis in industrials, our allocation is lower than it has been in recent quarters. Semiconductor stocks have risen solidly after lagging other technology stocks and the broader market for much of 2012, and we believe valuations and margins are quite full currently. However, we continue be constructive on the semiconductor capital equipment industry, where select companies will be the beneficiaries of a ramp-up in spending and industry consolidation.
We have responded to the muted global economic environment by increasing our focus on firms with secular growth prospects; in other words, companies that do not depend on a positive economic cycle for growing revenues and profits. In some cases, this is because they are exploiting new markets, such as social networking, but in others, it is because they are seizing market share from traditional competitors. Simultaneously, we have scaled back our exposure to tech companies, notably semiconductor firms, whose fortunes are more cyclical. In recent months, many other investors seem to have sought security in large and established tech firms with ample cash reserves and, often, a history of paying dividends. While these mega-cap stocks are certainly well positioned to survive another downturn in the global economy, we believe that many will continue losing market share to the more nimble competitors we prefer. Although our overall expectations for the market in 2015 are somewhat muted--and we would especially warn investors not to expect a repeat of the very strong performance of the past few years--we are confident that our positioning will offer long-term opportunities to our shareholders.