Large-cap growth stocks posted modest gains for the quarter, while small- and mid-caps recorded losses. Investors were encouraged that many companies were able to leverage moderate economic growth earlier in the year into better-than-expected profit growth. The generally positive tone to earnings reports helped the market in the third quarter, and growth stocks outperformed value across the market capitalization spectrum. Performance varied widely among sectors. Health care stocks generated good gains and fared best within the Standard & Poor's 500 Index, followed closely by information technology shares. Conversely, energy stocks suffered steep declines as oil prices fell, and utilities and industrials and business services shares also performed poorly.
The New America Growth Fund returned 2.12% in the quarter compared with 1.13% for the S&P 500 Index and 0.46% for the Lipper Multi-Cap Growth Funds Index. For the 12 months ended September 30, 2014, the fund returned 16.69% versus 19.73% for the S&P 500 Index and 16.13% for the Lipper Multi-Cap Growth Funds Index. The fund's average annual total returns were 16.69%, 15.64%, and 9.64% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2014. The fund's expense ratio was 0.81% 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.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The portfolio's focus is on companies that can grow organically and generate above-average earnings and cash flow growth. We emphasize growth companies, and we favor companies that don't depend on economic expansion to perform well. The information technology and consumer discretionary sectors remained the portfolio's largest allocations (and overweights versus the S&P 500 Index), accounting for about half of total net assets. The portfolio's technology and health care holdings were the strongest contributors to absolute and relative returns, while consumer discretionary and industrials and business services detracted. Compared with our benchmark, we have small allocations to financials, energy, and consumer staples stocks, and no exposure to telecommunication services and utilities. We believe that these segments will have a difficult time generating the above-average, consistent revenue and earnings gains that we look for in portfolio holdings.
We remain optimistic about the long-term prospects for larger-capitalization domestic growth companies. However, we don't expect to see a repeat of the expansion in price/earnings multiples that drove stock prices in recent quarters. Stocks are more likely to trade in tandem with corporate earnings growth, which we think will continue at a moderate pace into next year. In our view, valuations remain reasonable from a historical perspective, neither rich nor expensive on balance. As always, we are focused on long-term returns. We will attempt to take advantage of market volatility and investor uncertainty to buy high-quality growth companies that can deliver value by deploying cash wisely.