Which Investments Have Hurt the Harbor Capital Appreciation Fund the Most in 2016?

The Harbor Capital Appreciation Fund Investor Class has tanked by 3.5% YTD in 2016, making it the second-worst performer YTD among our 12 funds.

David Ashworth - Author
By

Jul. 22 2016, Published 7:55 p.m. ET

Performance evaluation

The Harbor Capital Appreciation Fund Investor Class (HCAIX) has tanked by 3.5% YTD (year-to-date) in 2016. This makes it the second-worst performer in the year so far, among the 12 funds chosen for this review.

For all periods in the graph below, HCAIX figures among the bottom three funds among its peers. We have graphed its performance against two ETFs: the iShares S&P 500 Growth ETF (IVW) and the iShares Russell 1000 Growth ETF (IWF). Let’s look at what has contributed to this poor performance by the fund YTD in 2016.

Article continues below advertisement
Article continues below advertisement

Portfolio composition and contribution to returns

Healthcare stocks have been the most hurtful to the fund’s returns YTD in 2016 as of July 15. Alexion Pharmaceuticals (ALXN) and Regeneron Pharmaceuticals (REGN) have led decliners and have had help from Allergan (AGN) and Illumina (ILMN). Bristol-Myers Squibb (BMY) has been the sole major positive contributor.

Information technology stocks, which form ~40% of the fund’s assets, have emerged as the second-biggest negative contributors in 1Q16. LinkedIn (LNKD) has hammered the sector. Other negative contributors include Palo Alto Networks (PANW), Red Hat (RHT), and Mastercard (MA). However, sizable positive contributions from Facebook (FB) and Tencent Holdings (TCEHY) have helped cap further decline of the sector.

Consumer discretionary and energy

Consumer discretionary stocks, which make up over 30% of the fund’s assets, have also contributed negatively to the fund. Positive contributions from Amazon.com (AMZN) have been undone by Netflix (NFLX), Luxottica Group (LUX), and JD.Com (JD).

Energy and financials are the only sectors to have contributed sizably positively to the fund. While Concho Resources (CXO) has fueled energy, American Tower (AMT) and S&P Global (SPGI) have helped financials.

Investor takeaways

The past year has been quite challenging for HCAIX, not just because its picks from the healthcare sector have hurt but also because there have not been enough positive contributions to balance the negative contributions. One of the reasons for this is the small number of stocks the fund is invested in, which exposes it to market whiplash.

The passively managed SPDR S&P 500 ETF (SPY) has easily outperformed HCAIX. However, since fund managers have performed well in the past, existing investors might try to be patient to see if they can turn things around. New investors would do well to look at other mutual funds.

Now let’s move to the next fund in this series: the MFS Growth Fund Class A (MFEGX).

Advertisement

Latest JD.com Inc ADR News and Updates

    Opt-out of personalized ads

    © Copyright 2024 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.