Attribution Analysis of US Mutual Funds through November 2015
Harbor Capital Appreciation Fund
According to the fund’s management, the Harbor Capital Appreciation Fund – Investor Class (HCAIX) “invests primarily in equity securities, specifically U.S. companies with market capitalizations of at least $1 billion at the time of purchase.” The fund managers meet the top management of the companies on their radar and aim to invest in those companies that they believe have:
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strong balance sheets and earnings performance
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sales momentum and growth outlook
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high profitability history or potential
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unique market position
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a capable and committed management team
Managers adopt a bottom-up approach while selecting securities for the portfolio. The Harbor Capital Appreciation Fund’s website also states that “the fund stays fully invested in stocks and does not try to time the market, but instead works toward steady investment growth.”
HCAIX’s assets were invested across just 63 holdings in stocks, bonds, and cash as of September 2015, and it managed $27.79 billion in assets as of the end of November.
As of the September portfolio, the fund’s equity holdings included Nike (NKE), Adobe Systems Incorporated (ADBE), The Boeing Company (BA), Biogen Inc. (BIIB), and Shire plc (SHPG), comprising a combined 10.4% of the fund’s portfolio.
Historical portfolios
For this analysis, we will examine the Harbor Capital Appreciation Fund’s holdings as of September 2015, which is the latest available sectoral breakdown. The post-September holdings reflect the valuation-driven changes to the portfolio, not the actual holdings.
The information technology and consumer discretionary sectors form a combined ~70% of the Harbor Capital Appreciation Fund’s portfolio. They are the top two sectors invested in by the fund, in that order. The healthcare sector is a distant third and the only other sector whose portfolio weight reads in two digits. The fund is not invested in the telecom services and utilities sectors.
Since November 2014 until the end of November 2015, the top two sectors have seen their respective weights increase in the portfolio. Apart from these two, the financials sector has also seen its share increase. All three sectors have seen new stocks being added to the portfolio during this timeframe while a few have been liquidated.
Energy, healthcare, and industrials are on the other end of the spectrum, and their shares of the portfolio pie have decreased during this period. A fall in energy prices has led to one stock being liquidated from the energy sector while others saw a sharp fall in valuation. Manufacturing has seen better days in the US, and the fund’s management has reduced its bets on the sector as well. Meanwhile, a reduction in the healthcare sector could have occurred because defensive bets were being reduced due to an improvement in the US economy.