Stocks endured a tumultuous first quarter. Large-caps underperformed small- and mid-caps, and growth stocks trailed value across all market capitalizations. Following seesaw returns in January (lower) and February (higher), large-cap growth companies trended lower in March - stocks with high-price/earnings multiples, those that performed the best last year, generally underperformed in the first quarter. Although many companies reported expanding profit margins and earnings, revenue growth remained lackluster. Within the large-cap S&P 500, the utilities and health care sectors posted the best returns, and consumer discretionary was the only sector to post a loss.
The Blue Chip Growth Fund returned −1.10% in the quarter compared with 1.81% for the S&P 500 Index and −0.11% for the Lipper Large-Cap Growth Funds Index. For the 12 months ended March 31, 2014, the fund returned 29.46% versus 21.86% for the S&P 500 Index and 25.04% for the Lipper Large-Cap Growth Funds Index. The fund's average annual total returns were 29.46%, 23.01%, and 8.49% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2014. The fund's expense ratio was 0.76% as of its fiscal year ended December 31, 2012.
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.
Our bottom-up stock selection process is leading us to favor more secular growth names, and, at the margin, we have trimmed some of the more cyclical and capital-intensive holdings. At the end of the quarter, the portfolio's largest sector allocations were in consumer discretionary, information technology, and industrials and business services. These sectors include companies that we believe can generate durable earnings and stable cash flow growth. We believe that the high-quality, stable-growth companies that the portfolio owns could perform well even if the economy only experiences modest expansion. The portfolio has minimal exposure to defensive sectors, including consumer staples, telecommunication services, and utilities.
We remain optimistic about the environment for equities for several reasons. First, corporate earnings and revenue growth are accelerating. Second, stock valuations remain attractive despite last year's strong performance. Third, inflation remains under control. And finally, although interest rates are likely to rise, moderately rising rates should not put a significant damper on equities. While a correction sparked by a geopolitical event is always possible, we do not anticipate a significant sell-off. We remain optimistic about the equity market's near- and longer-term prospects and believe that we are well-positioned to participate in the ongoing bull market. We will attempt 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