U.S. large-cap stocks surged in the fourth quarter as the improving economy and an accommodative Federal Reserve drew investors into U.S. equities. Both the S&P 500 Index and Dow Jones Industrial Average rose to unprecedented highs in December. Value stocks narrowly outpaced growth stocks in the large-cap universe, according to various Russell indexes. Sector performance in the S&P 500 was mixed: utilities rallied more than 13%, widely outperforming other sectors, as investors favored their attractive dividend yields. Energy stocks fared the worst as oil prices fell below $60 a barrel, its lowest level since May 2009. U.S. gross domestic product grew at an annualized 5.0% pace from July to September, marking the economy's fastest growth since the summer of 2003, the government reported in its latest GDP reading in December.
The Value Fund returned 4.66% in the quarter compared with 4.93% for the S&P 500 Index and 3.78% for the Lipper Large-Cap Value Funds Index. For the 12 months ended December 31, 2014, the fund returned 13.37% versus 13.69% for the S&P 500 Index and 11.01% for the Lipper Large-Cap Value Funds Index. The fund's average annual total returns were 13.37%, 16.14%, and 8.40% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 0.84% as of its fiscal year ended December 31, 2013.
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Sector allocations stayed broadly unchanged from the previous quarter. Financials and health care represented the largest overweight sectors at the end of December. Financials stocks have rebounded strongly from the 2008-2009 crisis, but we believe that valuations of select companies still appear reasonable on a normalized earnings basis and that the sector provides good leverage to the improving economy. In health care, the portfolio's largest exposure is to the pharmaceuticals industry, where companies generate strong cash flow and offer attractive dividend yields. We reduced utilities exposure over the quarter as yield-seeking investors drove up valuations. Information technology and consumer discretionary, respectively, remain the largest underweight sectors.
The magnitude of the stock market's climb in recent years has been surprising, given widespread expectations of tighter monetary policy after the Federal Reserve ended its latest round of monthly asset purchases in October. Short-term rates remain low, however, and strong corporate balance sheets and solid earnings growth throughout 2014 provide some reassurance that the stock market can sustain, and even extend, recent gains. Despite the runup in valuations in the large-cap universe, we continue to find select companies that are priced below their intrinsic value in a wide range of industries. We remain focused on our strategy of buying quality companies at attractive prices and maintaining a longer-term horizon to allow the market to recognize the value of the portfolio's holdings.