U.S. stocks advanced in the second quarter of 2016. As the period began, global stock markets extended the rally that began in mid-February, lifted by accommodative central bank policies in Europe and Japan and assurances from the U.S. Federal Reserve that it would proceed cautiously in raising interest rates. The UK's vote on June 23 to leave the European Union sparked a global markets rout that briefly pushed major U.S. stock indices into the red for the year, but a subsequent rally erased Brexit-induced losses and helped U.S. stocks generate a quarterly gain. Eight of 10 sectors in the Russell Midcap Value Index rose, led by the energy and materials sectors. Consumer discretionary and telecommunication services were the sole decliners. Value stocks outperformed growth across all market capitalizations.
The Mid-Cap Value Fund returned 4.29% in the quarter compared with 4.77% for the Russell Midcap Value Index, 2.10% for the Lipper Mid-Cap Value Funds Index and 2.75% for the Lipper Multi-Cap Value Funds Index. For the 12 months ended June 30, 2016, the fund returned 4.03% versus 3.25% for the Russell Midcap Value Index, −2.04% for the Lipper Mid-Cap Value Funds Index and −2.06% for the Lipper Multi-Cap Value Funds Index. The fund's average annual total returns were 4.03%, 10.93%, and 8.63% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 0.80% as of its fiscal year ended December 31, 2015.
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 fund's strategy is to buy and hold fundamentally solid companies whose shares are trading below their intrinsic value. These companies typically have fallen out of favor due to setbacks that we think are more solvable and transient than the market believes. The consumer staples sector was the biggest overweight at quarter-end. We see a number of attractively valued companies with durable businesses and strong market positions, particularly in the media industry. The materials sector is another sizable overweight due to a large allocation to the metals and mining industry. Utilities was the largest sector underweight at quarter-end, though consolidation has created a more favorable environment for power producers that have weathered a weak environment for several years.
The stock market's downturn from late 2015 to early 2016 produced more buying opportunities this year than we have encountered in the previous five years. Mid-cap stocks are generally not as cheap as they were early this year, but we are still finding companies that represent good value trading at levels significantly below their recent highs. Volatility in the U.S. stock market has increased sharply in 2016 compared with the past several years. We claim no special insight into the market's short-term direction, but our experience has shown that periods of heightened instability or uncertainty frequently produce the best buying opportunities for long-term investors. We are committed to our strategy of investing in fundamentally attractive companies that are trading below their intrinsic worth and maintaining a focus on long-term value.