Large-capitalization growth stocks posted solid gains for the quarter and, overall, value stocks in the large-cap universe slightly outperformed growth shares. However, large-caps underperformed small-and mid-cap stocks. Oil prices tumbled, leading to a double-digit decline in the energy sector, but savings at the pump translated into strong returns for the consumer staples and consumer discretionary segments. Health care stocks also logged good gains for the quarter, capping a fourth year of exceptionally strong broad market outperformance. Despite consensus expectations that interest rates would rise in 2014, the 10-year Treasury note yield fell almost a full percentage point (3.03% to 2.17%), which benefited the performance of utility stocks-the best-performing sector for the quarter and the past 12 months.
The Blue Chip Growth Fund returned 4.27% in the quarter compared with 4.93% for the S&P 500 Index and 4.55% for the Lipper Large-Cap Growth Funds Index. For the 12 months ended December 31, 2014, the fund returned 9.28% versus 13.69% for the S&P 500 Index and 10.34% for the Lipper Large-Cap Growth Funds Index. The fund's average annual total returns were 9.28%, 16.70%, and 8.81% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.74% as of its fiscal year ended December 31, 2013.
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.
We concentrate on selecting high-quality, stable-growth companies that could perform well even if the economy only experiences modest expansion in coming quarters. Our bottom-up stock selection process focuses on large- and mid-cap growth companies that can deliver steady revenues, earnings, and cash flow growth. At the end of the quarter, the largest sector allocations were information technology, health care, and consumer discretionary, accounting for about two-thirds of the portfolio. These sectors were the best absolute performance contributors for the past three months. However, stock selection hurt on comparison with the S&P 500 Index. We've maintained minimal exposure to defensive sectors where we believe it will be difficult to generate above-average, sustainable earnings gains, and underweight allocations to the consumer staples and utilities energy sectors crimped relative results.
We remain optimistic about the equity market's near- and longer-term prospects. Even after recording solid gains this year, we believe that the valuations for many high-quality companies remain reasonable. We intend to take advantage of market volatility and investor uncertainty to buy fundamentally sound companies that can generate double-digit earnings and durable cash flow growth when they are out of favor. Low interest rates and steadily expanding economic growth historically have been good for the equity markets. Additionally, we are seeing sign of improvement in consumer spending thanks to lower energy costs.