Media and telecommunications stocks suffered a sharp pullback in the third quarter as investors worried about the slowing Chinese economy and the prospect of higher interest rates in the U.S. Hardware and semiconductor stocks performed worst among the significant categories in our investment universe, but all segments recorded a loss.
The Media & Telecommunications Fund returned −5.24% in the quarter compared with −8.28% for the Lipper Telecommunication Funds Average. For the 12 months ended September 30, 2015, the fund returned 1.92% versus −3.43% for the Lipper Telecommunication Funds Average. The fund's average annual total returns were 1.92%, 15.01%, and 13.08% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2015. The fund's expense ratio was 0.80% as of its fiscal year ended December 31, 2014.
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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 is heavily overweight in the media sector, where we perceive many more growth opportunities, particularly among Internet-oriented firms. This positioning cushioned our decline in the difficult quarter, as media stocks fell less than telecommunications shares. Our stock selection in telecommunication services also helped, although this was partly offset by our selection in information services. We remain active investors in non-U.S. opportunities, particularly in the burgeoning Chinese online media and e-commerce markets.
We continue to expect that a muted global economic environment will offer modest returns for most stocks in our universe in coming months; although our outlook for 2016 has lately grown a bit more clouded. While we do perceive some pockets of opportunities, relatively full valuations will also likely keep a lid on gains. July's earnings reports confirmed the obstacles facing traditional media firms, which continue to struggle with a soft advertising market and face a further threat as viewers shift to other content sources. As a result, we are focusing on high-quality companies with strong brands that are less susceptible to declining advertising spending.