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The stock market ended the fourth quarter of 2013 on a strong note. The Dow gained nearly 10% for the fourth quarter, while achieving a very impressive 26.5% return for the full calendar year. The market also showed broader strength for the final quarter of 2013, with the Russell 3000 Index reporting a gain of 9.6%, in line with the Dow Index. Investors are dealing with equities that are richly valued. The bulls are holding their own, save for occasional selling squalls. Low interest rates and a better business outlook, it would seem, are helping to keep the stock market near record levels.

European stocks were up as well during the same three-month period, continuing a year long trend. The MSCI EAFE Index reported a gain of 5.4% in the fourth quarter and posted a 19.4% gain for the year. This was not as strong as the S&P 500, which moved up 10.5% and 32.4% for those periods, respectively. 

In the fourth quarter of 2013, all funds listed in the accompanying table reported gains for all the periods denoted.  The performance of their respective benchmarks (S&P 500, Russell 3000, MSCI EAFE, and MSCI WORLD) was impressive as well for the quarter and the year.

The best three month and one year performer was Dodge & Cox Stock Fund (DODGX), with returns of 11.8% and 40.6% for the respective periods. This fund holds a diversified portfolio of common stocks, with the objective of long-term growth of principal and income. As of December 31, 2013, the fund’s three largest holdings were Capital One Financial Corp. (COF), Hewlett Packard Co. (HPQ) and Wells Fargo & Co. (WFC). It currently has Value Line’s highest Overall Rank and an average Risk Rank, making it a possible choice for a variety of investors seeking good growth with moderate risk.

Another fund with a noteworthy performance is Fidelity Contrafund (FCNTX). For the three months ended December 31, 2013, it reported a total return of 10.5%, placing it second of the 15 funds on our list. This fund invests in companies with market capitalization in excess of $10 Billion which the fund’s manager believes have good growth prospects. As of December 31, 2013, it held about 88% of its assets in domestic equities, with Google Inc. (GOOG) as its largest position. It now has the highest Overall Rank and a better-than-average Risk Rank, also making it a possible choice for investors seeking current income and capital growth.

A third fund that outperformed its peers over the past three months ended December 31, 2013 is American Funds Investment Co of America Fund A (AIVSX). This fund invests primarily in common stocks, most of which have a history of paying dividends to achieve long-term growth of capital and income. As of December 31, 2013, the fund’s top three holdings were Gilead Sciences Inc. (GILD), Amgen Inc. (AMGN) and Philip Morris International (PM). It currently has an above-average Overall Rank and is also rated less risky than most funds we follow, making this a superior choice for investors.

   

Results

Through

Dec 31

2013

FUND NAME/

TICKER

Size

(billions)

3 Mos

(percent)

6 Mos

1 year

5 years

American Funds Growth Fund of America A

AGTHX

$63

9.4

19.5

33.8

18.3

Vanguard Total Stock Market Index

VTSMX

$92

10.0

16.9

33.3

18.7

American Funds EuroPacific Growth A

AEPGX

$31

7.6

17.8

20.2

13.5

Vanguard 500 Index

VFINX

$26

10.5

16.2

32.2

17.8

American Funds Capital World Growth & Income A

CWGIX

$50

7.7

16.3

24.8

14.4

American Funds Capital Income Builder A

CAIBX

$66

5.1

9.4

14.9

11.6

Vanguard Wellington

VWENX

$45

2.2

5.9

15.1

12.9

Fidelity Contrafund

FCNTX

$75

10.5

20.4

35.4

18.9

American Funds Investment Company of America A

AIVSX

$48

10.4

17.7

32.4

16.2

American Funds Income Fund of America A

AMECX

$64

6.0

10.2

18.3

13.9

Dodge & Cox Stock

DODGX

$46

11.8

19.6

40.6

19.6

American Funds Washington Mutual A

AWSHX

$48

9.8

15.0

31.9

16.5

American Funds New PerspectiveA

ANWPX

$35

8.5

17.5

26.8

17.0

American Funds Fundamental Investors A

ANCFX

$36

9.9

16.9

31.5

18.1

Franklin Income A

FKINX

$48

5.3

9.5

14.2

15.3

S&P 500 Index

 

10.5

16.3

32.4

17.9

Russell 3000

 

10.1

17.1

33.6

18.7

MSCI EAFE

 

5.4

16.9

19.4

9.1

MSCI WORLD

 

7.6

15.9

24.1

12.5

Barclays Aggregate Bond

 

-0.1

0.4

-2.0

4.5

Barclays High Yield Bond

 

3.6

6.0

7.5

18.9

At the time of this article's writing, the author had positions in VFINX.