Large-cap growth stocks posted good gains in the third quarter, adding to their strong first-half returns. Buoyed by hopes for continued monetary stimulus and a rebound in the global economy, investors bid up stocks despite slowing profit growth. The pace of U.S. job growth slackened during the quarter, yet investors generally seemed to interpret the data in a positive light, assuming that the slowdown might stay the Fed's hand in tightening monetary policy. Overall, small- and mid-cap stocks, which typically see bigger price swings than large-caps, performed particularly well.
The New America Growth Fund returned 12.13% in the quarter compared with 5.24% for the S&P 500 Index and 10.13% for the Lipper Multi-Cap Growth Funds Index. For the 12 months ended September 30, 2013, the fund returned 24.78% versus 19.34% for the S&P 500 Index and 24.08% for the Lipper Multi-Cap Growth Funds Index. The fund's average annual total returns were 24.78%, 13.13%, and 9.31% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2013. The fund's expense ratio was 0.81% as of its fiscal year ended December 31, 2012.
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We seek companies that can grow organically and generate steady earnings and cash flow growth, especially firms that are not dependent on economic growth to perform well. We made few significant shifts to the portfolio's sector allocations, but overall, we emphasized growth companies and trimmed defensive holdings. However, eliminations and additions were purely the result of our disciplined stock selection process. Information technology remained the portfolio's largest allocation, but we trimmed or eliminated holdings in the software and IT services segments. We increased our allocation to the financials and energy sectors, although both remain below-benchmark weightings. In the health care sector, we made significant additions in biotech and trimmed health care providers and services and equipment and supplies companies. With the help of our dedicated team of research analysts, we are finding what we think are good investment opportunities in undiscovered and out-of-favor stocks.
We remain optimistic about the long-term prospects for equities. U.S. consumer sentiment has benefited from a period of deleveraging, a modest inflation environment, and significant gains in household net worth. The domestic housing and labor markets continue to improve, which has also boosted confidence and spurred a wealth effect. Despite the recent runup in the prices and valuations of many large-cap growth companies, we still think that there is room for growth stocks to continue to appreciate. We remain focused on bottom-up stock selection and identifying fundamentally sound companies that can generate double-digit earnings and durable cash flow growth.