U.S. large-cap stocks advanced in the final quarter of 2015, pushing the S&P 500 Index back into positive territory for the year on a total return (including dividends) basis. Most of the gains occurred in October, and stocks were volatile in the year's final weeks as geopolitical strife and uncertainty over monetary policy weighed on sentiment. The U.S. economic outlook remained bright enough for the Federal Reserve to raise the benchmark fed funds rate on December 16, its first rate hike after seven years of near-zero rates. All sectors in the S&P 500 advanced. Materials rose the most, gaining nearly 10% as a few large mergers offset weak commodity prices. Energy stocks added the least as global oil prices sank to an 11-year low of roughly $37 a barrel. Value stocks underperformed growth across all market capitalizations.
The Value Fund returned 7.64% in the quarter compared with 7.04% for the S&P 500 Index and 5.64% for the Lipper Large-Cap Value Funds Index. For the 12 months ended December 31, 2015, the fund returned −1.74% versus 1.38% for the S&P 500 Index and −3.65% for the Lipper Large-Cap Value Funds Index. The fund's average annual total returns were −1.74%, 12.36%, and 7.55% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. The fund's expense ratio was 0.82% as of its fiscal year ended December 31, 2014.
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Health care and financials were the portfolio's largest overweight sectors as of year-end. In health care, holdings are concentrated in the pharmaceuticals and health care providers and services industries. The portfolio's pharmaceutical holdings have cut costs and refocused their investments in research and development while returning cash to shareholders through share repurchases and dividends. In financials, holdings are largely banks, insurers, and capital markets companies. Financials stocks have recovered from the 2008 global financial crisis, but we think that valuations of select companies still appear reasonable on a normalized earnings basis and the sector provides good leverage to the improving U.S. economy. Information technology remains our largest underweight sector, followed by consumer discretionary.
Valuations appear more stretched after the U.S. stock market's fourth-quarter gain. The U.S. economy has exhibited mixed signals as unemployment has declined, housing demand slowly improves, and consumers have benefited from lower oil and gas prices. However, many consumer discretionary companies have not seen broad increases in demand, and many industrials companies are struggling with recession-like conditions. We anticipate subdued performance for the economy and stock market and have positioned the portfolio more defensively with overweight allocations to health care, consumer staples, and utilities, sectors that we believe will outperform in a weaker environment. Despite expensive valuations in the large-cap universe, we continue to find select companies that are trading below their intrinsic value. We remain focused on buying quality companies at attractive prices and maintaining a long-term horizon to give holdings time to become fully valued.