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 New America Growth Fund returned −7.28% in the quarter compared with −6.44% for the S&P 500 Index and −7.83% for the Lipper Multi-Cap Growth Funds Index. For the 12 months ended September 30, 2015, the fund returned 2.85% versus −0.61% for the S&P 500 Index and 2.21% for the Lipper Multi-Cap Growth Funds Index. The fund's average annual total returns were 2.85%, 13.90%, and 8.89% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.79% 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.
The portfolio invests in companies that we believe can generate above-average earnings and cash flow growth. Our bottom-up stock selection strategy focuses on companies that can grow organically and don't depend on a strong economy to perform well. The information technology, health care, and consumer discretionary sectors are the portfolio's largest holdings and significant overweight allocations, representing approximately three-quarters of the portfolio. Stock selection and an overweight to the consumer discretionary sector produced strong relative performance. However, stock selection and an overweight to health care hurt absolute and relative returns. Our significant underweight allocations to financials, energy, and consumer staples stocks compared with our benchmark, and no exposure to telecommunication services and utilities, reflect the paucity of companies that we believe will generate above-average growth in these areas.
Although market volatility is likely to remain elevated, we are optimistic about the outlook for larger-capitalization growth stocks. During the third-quarter correction, we maintained our focus on companies that can generate long-term revenue, earnings, and cash flow growth and added to several positions that we believed had been oversold. 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. Moving forward, we intend to focus on "all seasons" growth companies, those with solid fundamentals and the ability to grow earnings organically.