Stocks endured a tumultuous first quarter. Large-caps underperformed small- and mid-caps, and growth stocks trailed value across all market capitalizations. Following seesaw returns in January (lower) and February (higher), growth companies trended lower in March - stocks with high-price/earnings multiples and those that performed the best last year, generally underperformed in the first quarter. Although many companies reported expanding profit margins and earnings, revenue growth showed only modest improvement. Within the large-cap S&P 500, the utilities and health care sectors posted the best returns, and consumer discretionary was the only sector to post a loss
The New America Growth Fund returned −0.95% in the quarter compared with 1.81% for the S&P 500 Index and 1.70% for the Lipper Multi-Cap Growth Funds Index. For the 12 months ended March 31, 2014, the fund returned 25.94% versus 21.86% for the S&P 500 Index and 26.48% for the Lipper Multi-Cap Growth Funds Index. The fund's average annual total returns were 25.94%, 21.60%, and 8.85% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2014. The fund's expense ratio was 0.81% as of its fiscal year ended December 31, 2012.
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Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
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We seek companies that can grow organically and generate above-average earnings and cash flow growth, especially firms that are not dependent on economic expansion to perform well. We made few significant shifts in the portfolio's sector allocations, but overall we emphasized growth companies and trimmed defensive holdings. The information technology and consumer discretionary sectors remain the portfolio's largest allocations, accounting for nearly half of our total net assets. Compared with our benchmark index, we have small allocations to financials, energy, and consumer staples stocks, and no exposure to telecommunication services and utilities, which we believe will have a difficult time generating solid earnings gains.
We remain optimistic about the long-term prospects for multi-cap domestic growth stocks. Even after recording strong gains in 2013, we believe that the valuations for many high-quality companies remain reasonable. Looking forward, we expect stocks to continue to appreciate, although at a more moderate pace. Although investors have rotated away from some of last year's best performers, the factors driving that move had minimal impact on company fundamentals, which, for the most part, remain strong. We will attempt to take advantage of market volatility and investor uncertainty to buy fundamentally sound growth companies generating solid earnings and cash flow growth.