Stocks enjoyed strong gains in the third quarter. Buoyed by hopes for continued monetary stimulus and a rebound in the global economy, investors bid up stocks despite slowing profit growth. Most of the major stock indexes moved further into record territory before pulling back late in the period. Small-cap stocks, which typically see bigger price swings than large-caps, fared particularly well. Small-cap value stocks trailed their growth counterparts by a substantial margin, however.
The Small-Cap Value Fund returned 7.93% in the quarter compared with 10.21% for the Russell 2000 Index and 9.32% for the Lipper Small-Cap Core Funds Index. For the 12 months ended September 30, 2013, the fund returned 26.29% versus 30.06% for the Russell 2000 Index and 29.01% for the Lipper Small-Cap Core Funds Index. The fund's average annual total returns were 26.29%, 11.03%, and 11.21% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2013. The fund's expense ratio was 0.98% as of its fiscal year ended December 31, 2012.
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 Small-Cap Value Fund charges a 1%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
While we are not anticipating a market tumble, we have been adopting a more defensive stance in the portfolio. In becoming more defensive, we employ the same fundamental approach that we use when stocks have sold off and we perceive ample opportunity: We have been going through the portfolio on a stock-by-stock basis to identify where we might substitute an existing holding for one with a more compelling valuation. This has led us to trim or eliminate some of the portfolio's winners, including some longtime holdings, where valuations have become stretched and the stock has pushed upward into the mid-cap category. In their place, we have been seeking to add companies that are truly mispriced, which is the essence of value investing, in our view.
Inevitably, the market's strong performance in the third quarter has heightened our caution about the likelihood of further gains in the remainder of the year. Moreover, as the market's gains have mounted, so have signs of speculative activity. These have been most evident in the IPO market, where some stocks have more than doubled on their first day of trading. Historically, phenomena such as this have been an indication that the market is closer to a top than to a bottom. While we are becoming more somewhat defensive in our positioning, we are maintaining our focus on long-term opportunities and continue to make investments across all segments of the market.