U.S. equities rose in the first quarter of 2013, and several of the major market indexes set all-time highs. Stocks advanced against a backdrop of steady, albeit modest, economic expansion and the Federal Reserve's asset purchase program, which helped keep interest rates low and stimulate growth. Merger and acquisition activity also buoyed investor sentiment. However, sentiment was tempered by concerns that the European debt crisis could flare up again. Although every sector in the S&P 500 Index advanced, defensive sectors, including health care, consumer staples, and utilities, performed the best, while information technology and materials stocks generated far less robust gains.
The Blue Chip Growth Fund returned 8.15% in the quarter compared with 10.61% for the S&P 500 Index and 8.17% for the Lipper Large-Cap Growth Funds Index. For the 12 months ended March 31, 2013, the fund returned 7.84% versus 13.96% for the S&P 500 Index and 7.04% for the Lipper Large-Cap Growth Funds Index. The fund's average annual total returns were 7.84%, 7.13%, and 8.85% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2013. The fund's expense ratio was 0.77% as of its fiscal year ended December 31, 2011.
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's largest allocations are in sectors having some economic sensitivity, including information technology, consumer discretionary, and industrials and business services. We favor companies that can generate durable earnings and stable cash flow growth. We intend to avoid traditionally defensive sectors, including consumer staples, telecommunication services, and utilities, which we believe will be challenged to generate steady, above-average growth. Our holdings in the health care and energy sectors were solid performance contributors, while our large allocation to information technology performed poorly. We don't make big portfolio shifts based on economic forecasts; bottom-up stock selection largely determines the portfolio's allocations.
We believe that the market has already discounted many of the global market challenges and that the valuations for many high-quality companies remain reasonable. Policy and regulatory risks are the primary variables that could derail a recovery. However, even if the proper policy choices are pursued, it may take considerable time for meaningful improvement in budget deficits and economic growth. Despite the strong first-quarter rally, the earnings and free cash flow yields on stocks are compelling. We think that high-quality, large-cap growth stocks can deliver attractive returns relative to other financial investments. We will attempt to take advantage of market volatility and investor uncertainty to identify fundamentally sound companies that can generate double-digit earnings and durable cash flow growth when they are out of favor.