U.S. stocks were mixed in the third quarter amid turmoil in the Middle East and Ukraine, an economic slowdown overseas, and continued Fed tapering. Large-caps edged upward with support from favorable U.S. economic data and good corporate fundamentals, but increased risk aversion and valuation concerns punished small- and mid-cap shares. Natural resources stocks trailed the broader U.S. and global equities markets by a wide margin. Concerns about the impact on aggregate demand from slower global economic growth weighed on commodity prices, as did a stronger dollar. Oil prices were particularly hard hit by weaker demand expectations and growing supply.
The New Era Fund returned −7.88% in the quarter compared with 1.13% for the S&P 500 Index and −10.41% for the Lipper Global Natural Resources Funds Index. For the 12 months ended September 30, 2014, the fund returned 11.60% versus 19.73% for the S&P 500 Index and 4.05% for the Lipper Global Natural Resources Funds Index. The fund's average annual total returns were 11.60%, 7.01%, and 8.34% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2014. The fund's expense ratio was 0.66% as of its fiscal year ended December 31, 2013.
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Agricultural products turned in strong absolute results in an otherwise dismal environment for natural resources stocks. The current environment of high yields, big crops, and low crop prices are positives for agricultural processors. Bumper crops allow them to run their plants at high utilization rates, while low crop prices result in reduced working capital requirements and lower input costs. Stocks in companies exposed to oil prices struggled, including our U.S. oil exploration and production firms. Though we expect oil prices to trend down over the long term, the recent correction was particularly sharp and we would not be surprised to see a short-term recovery.
The medium term is likely to remain challenging for natural resources shares, but we are mindful that there is the potential for periods of cyclical dislocations that could give commodity prices a boost. Current areas of focus include energy exploration and production companies with decreasing costs and accelerating production growth, particularly North American shale producers. We are also looking at commodity-related companies whose input costs are declining while product sales are increasing, including utilities and specialty chemicals. Short-term volatility, such as that arising from heightened geopolitical turmoil, could give commodity and energy prices a boost and offer new investment opportunities.