- Brian C. Rogers
- Managed Fund Since: 10/31/1985
- Joined Firm On 05/28/1982*
- B.A., Harvard College; M.B.A., Harvard Business School
The S&P 500 Index turned in its best quarterly performance since the third quarter of 2009 as the eurozone backed away from the threat of collapse, the U.S. economy showed continued signs of life, and central banks pledged to step in and support global economic growth. Investors diverted assets from relatively safe but low-yielding bonds into riskier investments following last year's turmoil. Strong corporate earnings reports also bolstered U.S. equity returns.
The Equity Income Fund returned 11.23% in the quarter compared with 12.59% for the S&P 500 Index and 9.28% for the Lipper Equity Income Funds Index. For the 12 months ended March 31, 2012, the fund returned 4.51% versus 8.54% for the S&P 500 Index and 5.99% for the Lipper Equity Income Funds Index. The fund's average annual total returns were 4.51%, 0.92%, and 4.71% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2012.The fund's expense ratio was 0.70% as of its fiscal year ended, December 31, 2010.
The industrials and business services, consumer discretionary, and health care sectors contributed the most to the portfolio's performance during the period, with stock selection playing an important role within the first two groups. The portfolio's energy holdings and weighting in the group were most detrimental, and our stock selection in utilities also trimmed results since utilities declined as investors embraced more risk. All sectors except utilities advanced, led by financials, which made up the portfolio's largest sector allocation. Within materials, the portfolio's largest exposure is to the chemicals, paper, and forest products industries, while in health care we favor pharmaceuticals with their strong cash flow and attractive dividends despite concerns about the sector overall.
Our outlook for U.S. stocks remains positive through the foreseeable future. We are encouraged that price/earnings multiples are still reasonable despite the strong first-quarter gains; there is room for an expansion of those multiples as the economy strengthens; overall corporate earnings have been healthy and should continue to improve; and the risk of an extraneous impact on the markets from the eurozone and elsewhere is receding. In this environment, we continue to seek out promising opportunities in select areas of the market, without making wholesale changes to our portfolios. As always, we focus on established companies exhibiting attractive stock valuations and reasonable dividend yields rather than on a broad view of economic conditions.