Stock Fund
Objectives â–ª The Fund seeks long-term growth of principal and income. A secondary objective is to achieve a reasonable current income.
Strategy â–ª The Fund invests primarily in a diversified portfolio of common stocks. In selecting investments, the Fund invests in companies that, in Dodge & Cox's opinion, appear to be temporarily undervalued by the stock market but have a favorable outlook for longterm growth. The Fund focuses on the underlying financial condition and prospects of individual companies, including future earnings, cash flow, and dividends. Various other factors, including financial strength, economic condition, competitive advantage, quality of the business franchise, and the reputation, experience, and competence of a company's management are weighed against valuation in selecting individual securities.
Risks â–ª The Fund is subject to stock market risk, meaning stocks in the Fund may decline in value for extended periods due to the financial prospects of individual companies or due to general market and economic conditions. Please read the prospectus for specific details regarding the Fund's risk profile.
Returns represent past performance and do not guarantee future results. Investment return and share price will fluctuate with market conditions, and investors may have a gain or loss when shares are sold. Mutual fund performance changes over time and currently may be significantly lower than stated above. Performance is updated and published monthly. Visit the Fund's website at www.dodgeandcox.com or call 800-621-3979 for current performance figures.
The Dodge & Cox Stock Fund had a total return of 0.3% for the second quarter of 2011, compared to 0.1% for the S&P 500 Index. For the six months ended June 30, 2011, the Fund had a total return of 6.3%, compared to 6.0% for the S&P 500. At quarter end, the Fund had net assets of $43.8 billion with a cash position of 1.0%.
MARKET COMMENTARY
The S&P 500 rose during April but fell during May and June, causing second quarter performance to be flat. Health Care was the strongestperforming sector in the market for both the second quarter and year-to-date periods. There were several ongoing concerns weighing upon investors. The U.S. housing market continued its slump, with the Case-Shiller Index reporting that home prices hit a new low in March. European sovereign debt concerns escalated again with the potential default by Greece, and the effects of the Japanese earthquake and tsunami continued to impact supply chains around the world.
In spite of these short-term concerns, we are encouraged by the robust health of corporate balance sheets and continuing growth in corporate earnings. We believe that equity valuations are attractive and the Fund is well positioned for long-term investors with the patience to endure short-term declines.
SECOND QUARTER PERFORMANCE REVIEW
The Fund slightly outperformed the S&P 500 during the quarter.
KEY CONTRIBUTORS TO RELATIVE RESULTS
â–ª A much higher average weighting in the Health Care sector (21% versus 12% for the S&P 500 sector) contributed to results, as the sector was the strongest in the market. Pharmaceutical holdings Sanofi (up 18%), Roche (up 17%), GlaxoSmithKline (up 13%), and Novartis (up 12%) performed well.
â–ª Relative returns in the Energy sector (down 3% versus down 5% for the S&P 500 sector) and a lower average weighting (10% versus 13%) helped.
â–ª Additional contributors included DISH Network (up 26%), Electronic Arts (up 21%), and Sprint Nextel (up 16%).
KEY DETRACTORS FROM RELATIVE RESULTS
â–ª A lower average Consumer Staples sector weighting (3% versus 11% for the S&P 500 sector) detracted from results, as the area outperformed the broad market.
â–ª Weak relative returns from holdings in the Financials sector (down 7% versus down 6% for the S&P 500 sector) hurt returns. Goldman Sachs (down 16%), Bank of New York Mellon (down 14%), and Wells Fargo (down 11%) lagged.
â–ª Additional detractors included Computer Sciences Corp. (down 22%), Sony (down 17%), and Hewlett-Packard (down 11%).
YEAR-TO-DATE PERFORMANCE REVIEW
The Fund also slightly outperformed the S&P 500 year to date.
KEY CONTRIBUTORS TO RELATIVE RESULTS
â–ª Relative returns from Consumer Discretionary holdings (up 12% versus up 8% for the S&P 500 sector), in combination with a higher average weighting (17% versus 11%), contributed to results. Media companies News Corp. (up 22%), Time Warner Cable (up 20%), Comcast (up 16%), and Time Warner (up 15%) were strong performers.
â–ª Relative returns from Financials holdings (flat versus down 3% for the S&P 500 sector) were beneficial. SLM Corp. (up 34%) and Capital One (up 22%) helped.
â–ª Led by Sprint Nextel (up 27%), returns in the Telecommunication Services sector (up 15% versus up 7% for the S&P 500 sector) had a positive effect.
â–ª Additional contributors included Electronic Arts (up 44%), Sanofi (up 29%), Baker Hughes (up 27%), and Motorola Solutions (up 24%).
KEY DETRACTORS FROM RELATIVE RESULTS
â–ª Weak relative returns from holdings in the Industrials sector (up 5% versus up 8% for the S&P 500 sector) detracted. FedEx (up 2%) lagged.
â–ª Weak relative returns from Information Technology holdings (up 1% versus up 2% for the S&P 500 sector) and a higher average weighting (21% versus 18%) hurt results. Weak performers included Nokia (down 35%), Motorola Mobility (down 27% from spin-off), and Hewlett-Packard (down 13%).
â–ª A lower average Energy sector weighting (10% versus 13% for the S&P 500 sector) had a negative impact, as the area was strong.
â–ª Additional detractors included Sony (down 26%), Bank of New York Mellon (down 15%), and Wells Fargo (down 9%).
(a) SEC yield is an annualization of the Fund’s total net investment income per share for the 30-day period ended on the last day of the month.
(b) Price-to-earnings (P/E) ratios are calculated using 12-month forward earnings estimates.
(c) Foreign stocks are U.S. dollar-denominated.
(d) The Fund’s portfolio holdings are subject to change without notice. The mention of specific securities is not a recommendation or solicitation for any person to buy, sell, or
hold any particular security.
*The Fund's total returns include the reinvestment of dividend and capital gain distributions, but have not been adjusted for any income taxes payable by shareholders on these distributions or on Fund share redemptions. Index returns include dividends but, unlike Fund returns, do not reflect fees or expenses.
The S&P 500 Index is a market capitalization-weighted index of 500 large-capitalization stocks commonly used to represent the U.S. equity market. S&P 500® is a trademark of The McGraw-Hill Companies.
Before investing in any Dodge & Cox Fund, you should carefully consider the Fund's investment objectives, risks, management fees, and other expenses. To obtain a Fund's prospectus and summary prospectus, which contain this and other important information, visit www.dodgeandcox.com or call 800-621-3979. Please read the prospectus and summary prospectus carefully before investing.
Objectives â–ª The Fund seeks long-term growth of principal and income. A secondary objective is to achieve a reasonable current income.
Strategy â–ª The Fund invests primarily in a diversified portfolio of common stocks. In selecting investments, the Fund invests in companies that, in Dodge & Cox's opinion, appear to be temporarily undervalued by the stock market but have a favorable outlook for longterm growth. The Fund focuses on the underlying financial condition and prospects of individual companies, including future earnings, cash flow, and dividends. Various other factors, including financial strength, economic condition, competitive advantage, quality of the business franchise, and the reputation, experience, and competence of a company's management are weighed against valuation in selecting individual securities.
Risks â–ª The Fund is subject to stock market risk, meaning stocks in the Fund may decline in value for extended periods due to the financial prospects of individual companies or due to general market and economic conditions. Please read the prospectus for specific details regarding the Fund's risk profile.
Returns represent past performance and do not guarantee future results. Investment return and share price will fluctuate with market conditions, and investors may have a gain or loss when shares are sold. Mutual fund performance changes over time and currently may be significantly lower than stated above. Performance is updated and published monthly. Visit the Fund's website at www.dodgeandcox.com or call 800-621-3979 for current performance figures.
The Dodge & Cox Stock Fund had a total return of 0.3% for the second quarter of 2011, compared to 0.1% for the S&P 500 Index. For the six months ended June 30, 2011, the Fund had a total return of 6.3%, compared to 6.0% for the S&P 500. At quarter end, the Fund had net assets of $43.8 billion with a cash position of 1.0%.
MARKET COMMENTARY
The S&P 500 rose during April but fell during May and June, causing second quarter performance to be flat. Health Care was the strongestperforming sector in the market for both the second quarter and year-to-date periods. There were several ongoing concerns weighing upon investors. The U.S. housing market continued its slump, with the Case-Shiller Index reporting that home prices hit a new low in March. European sovereign debt concerns escalated again with the potential default by Greece, and the effects of the Japanese earthquake and tsunami continued to impact supply chains around the world.
In spite of these short-term concerns, we are encouraged by the robust health of corporate balance sheets and continuing growth in corporate earnings. We believe that equity valuations are attractive and the Fund is well positioned for long-term investors with the patience to endure short-term declines.
SECOND QUARTER PERFORMANCE REVIEW
The Fund slightly outperformed the S&P 500 during the quarter.
KEY CONTRIBUTORS TO RELATIVE RESULTS
â–ª A much higher average weighting in the Health Care sector (21% versus 12% for the S&P 500 sector) contributed to results, as the sector was the strongest in the market. Pharmaceutical holdings Sanofi (up 18%), Roche (up 17%), GlaxoSmithKline (up 13%), and Novartis (up 12%) performed well.
â–ª Relative returns in the Energy sector (down 3% versus down 5% for the S&P 500 sector) and a lower average weighting (10% versus 13%) helped.
â–ª Additional contributors included DISH Network (up 26%), Electronic Arts (up 21%), and Sprint Nextel (up 16%).
KEY DETRACTORS FROM RELATIVE RESULTS
â–ª A lower average Consumer Staples sector weighting (3% versus 11% for the S&P 500 sector) detracted from results, as the area outperformed the broad market.
â–ª Weak relative returns from holdings in the Financials sector (down 7% versus down 6% for the S&P 500 sector) hurt returns. Goldman Sachs (down 16%), Bank of New York Mellon (down 14%), and Wells Fargo (down 11%) lagged.
â–ª Additional detractors included Computer Sciences Corp. (down 22%), Sony (down 17%), and Hewlett-Packard (down 11%).
YEAR-TO-DATE PERFORMANCE REVIEW
The Fund also slightly outperformed the S&P 500 year to date.
KEY CONTRIBUTORS TO RELATIVE RESULTS
â–ª Relative returns from Consumer Discretionary holdings (up 12% versus up 8% for the S&P 500 sector), in combination with a higher average weighting (17% versus 11%), contributed to results. Media companies News Corp. (up 22%), Time Warner Cable (up 20%), Comcast (up 16%), and Time Warner (up 15%) were strong performers.
â–ª Relative returns from Financials holdings (flat versus down 3% for the S&P 500 sector) were beneficial. SLM Corp. (up 34%) and Capital One (up 22%) helped.
â–ª Led by Sprint Nextel (up 27%), returns in the Telecommunication Services sector (up 15% versus up 7% for the S&P 500 sector) had a positive effect.
â–ª Additional contributors included Electronic Arts (up 44%), Sanofi (up 29%), Baker Hughes (up 27%), and Motorola Solutions (up 24%).
KEY DETRACTORS FROM RELATIVE RESULTS
â–ª Weak relative returns from holdings in the Industrials sector (up 5% versus up 8% for the S&P 500 sector) detracted. FedEx (up 2%) lagged.
â–ª Weak relative returns from Information Technology holdings (up 1% versus up 2% for the S&P 500 sector) and a higher average weighting (21% versus 18%) hurt results. Weak performers included Nokia (down 35%), Motorola Mobility (down 27% from spin-off), and Hewlett-Packard (down 13%).
â–ª A lower average Energy sector weighting (10% versus 13% for the S&P 500 sector) had a negative impact, as the area was strong.
â–ª Additional detractors included Sony (down 26%), Bank of New York Mellon (down 15%), and Wells Fargo (down 9%).
(a) SEC yield is an annualization of the Fund’s total net investment income per share for the 30-day period ended on the last day of the month.
(b) Price-to-earnings (P/E) ratios are calculated using 12-month forward earnings estimates.
(c) Foreign stocks are U.S. dollar-denominated.
(d) The Fund’s portfolio holdings are subject to change without notice. The mention of specific securities is not a recommendation or solicitation for any person to buy, sell, or
hold any particular security.
*The Fund's total returns include the reinvestment of dividend and capital gain distributions, but have not been adjusted for any income taxes payable by shareholders on these distributions or on Fund share redemptions. Index returns include dividends but, unlike Fund returns, do not reflect fees or expenses.
The S&P 500 Index is a market capitalization-weighted index of 500 large-capitalization stocks commonly used to represent the U.S. equity market. S&P 500® is a trademark of The McGraw-Hill Companies.
Before investing in any Dodge & Cox Fund, you should carefully consider the Fund's investment objectives, risks, management fees, and other expenses. To obtain a Fund's prospectus and summary prospectus, which contain this and other important information, visit www.dodgeandcox.com or call 800-621-3979. Please read the prospectus and summary prospectus carefully before investing.
