The Large Cap Value Fund posted a total return of 10.73% for the quarter, compared with 10.01% for the Fund's benchmark, the Russell 1000® Value Index. Stock selection in the financials and materials sectors, combined with the positive effects of avoiding the underperforming utilities sector, contributed favorably to the Fund's performance. Stock selection detracted from relative performance in the consumer staples, healthcare and information technology sectors.
Although the U.S. remains at risk from rising interest rates, taxes and energy prices, we believe investors can neutralize such concerns over the long run by focusing on value stocks, or not overpaying for equities. We believe the market is entering a "sweet spot" for active management, offering more normalized growth and return expectations compared with the volatile climate of 2011-2012, and correlations among benchmark stocks may return to more traditional levels. We will continue to follow our discipline of investing in out-of-favor companies offering strong underlying value that we believe will be the beneficiaries of better economic times ahead. We remain optimistic about our active security selection, which emphasizes fundamental research to identify mispriced stocks. We seek to hold these undervalued stocks until they reach what our research identifies as their intrinsic value.
If you are a value-oriented investor seeking long-term capital appreciation with the relatively lower risks of large, dividend-paying stocks, this Fund may be ideal for you. With its emphasis on relatively low-priced, high-yielding stocks, it can work in tandem with a growth-oriented fund to create a well-balanced, diversified stock portfolio.
- Focus on valuation and dividend yield, which is designed to contribute positively to total return and provide a cushion against market volatility.
- Select stocks based on valuation levels, financial strength and earnings growth potential, identifying a catalyst for potential appreciation, such as a new product line or corporate restructuring.
- Maintain a strict sell discipline — systematically sell stocks that we believe have achieved their true value.