Environment
U.S. stocks rallied sharply in the third quarter against the backdrop of weakening global economic activity. The S&P 500 Index rose more than 6%, driven largely by the latest bond-buying programs by the U.S. Federal Reserve and the European Central Bank, as well as impending stimulus from the Chinese government. The U.S. economy has continued its moderate growth pace, thanks to an improvement in housing and a recent report that the manufacturing sector grew for the first time in four months, buoyed by an increase in new orders.
Performance
The Equity Income Fund returned 6.32% in the quarter compared with 6.35% for the S&P 500 Index and 5.60% for the Lipper Equity Income Funds Index. For the 12 months ended September 30, 2012, the fund returned 28.90% versus 30.20% for the S&P 500 Index and 26.78% for the Lipper Equity Income Funds Index. The fund's average annual total returns were 28.90%, 0.55%, and 7.97% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2012. The fund's expense ratio was 0.68% as of its fiscal year ended December 31, 2011.
Portfolio Highlights
The porfolio's consumer discretionary, financials, and energy holdings made the strongest contributions to fund results during the third quarter. Industrials and business services also weighed in with good returns. The weakest components among S&P sectors were the portfolio's utilities and information technology positions. At the end of the quarter, information technology constituted the largest sector weighting in the portfolio, followed by financials, health care, energy, and consumer discretionary stocks. The portfolio's sector weightings do not reflect a bias toward any particular segment of the market. Rather, they are the result of our bottom-up stock analysis in our search for attractive investments for the portfolio.
Outlook
There is little doubt that coordinated actions by global central banks have helped boost equity returns throughout the year. While it is extremely difficult, if not impossible, to forecast global political and economic developments, we are moderately optimistic that some progress will be made on the eurozone sovereign debt front, that new leadership in China will initiate stimulus measures to support the flagging Chinese economy, and that the President and new U.S. Congress will begin to seriously address our monumental fiscal issues. As always, we focus on companies exhibiting good value characteristics, those presenting attractive stock valuations and dividend yields, which currently appear to be overlooked in the market.
U.S. stocks rallied sharply in the third quarter against the backdrop of weakening global economic activity. The S&P 500 Index rose more than 6%, driven largely by the latest bond-buying programs by the U.S. Federal Reserve and the European Central Bank, as well as impending stimulus from the Chinese government. The U.S. economy has continued its moderate growth pace, thanks to an improvement in housing and a recent report that the manufacturing sector grew for the first time in four months, buoyed by an increase in new orders.
Performance
The Equity Income Fund returned 6.32% in the quarter compared with 6.35% for the S&P 500 Index and 5.60% for the Lipper Equity Income Funds Index. For the 12 months ended September 30, 2012, the fund returned 28.90% versus 30.20% for the S&P 500 Index and 26.78% for the Lipper Equity Income Funds Index. The fund's average annual total returns were 28.90%, 0.55%, and 7.97% for the 1-, 5-, and 10-year periods, respectively, as of September 30, 2012. The fund's expense ratio was 0.68% as of its fiscal year ended December 31, 2011.
Portfolio Highlights
The porfolio's consumer discretionary, financials, and energy holdings made the strongest contributions to fund results during the third quarter. Industrials and business services also weighed in with good returns. The weakest components among S&P sectors were the portfolio's utilities and information technology positions. At the end of the quarter, information technology constituted the largest sector weighting in the portfolio, followed by financials, health care, energy, and consumer discretionary stocks. The portfolio's sector weightings do not reflect a bias toward any particular segment of the market. Rather, they are the result of our bottom-up stock analysis in our search for attractive investments for the portfolio.
Outlook
There is little doubt that coordinated actions by global central banks have helped boost equity returns throughout the year. While it is extremely difficult, if not impossible, to forecast global political and economic developments, we are moderately optimistic that some progress will be made on the eurozone sovereign debt front, that new leadership in China will initiate stimulus measures to support the flagging Chinese economy, and that the President and new U.S. Congress will begin to seriously address our monumental fiscal issues. As always, we focus on companies exhibiting good value characteristics, those presenting attractive stock valuations and dividend yields, which currently appear to be overlooked in the market.
