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What Portfolio Moves Did HCAIX Make Leading Up to 1Q16?

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Harbor Capital Appreciation Fund

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.”

HCAIX’s fund managers meet the top management of the companies on their radar and claim to invest in those companies they believe have the following:

  • strong balance sheets and earnings performance
  • sales momentum and growth outlook
  • high profitability history or potential
  • unique market position
  • a capable and committed management team

Managers adopt a bottom-up approach while selecting securities for the portfolio. The fund’s website also claims that it “stays fully invested in stocks and does not try to time the market, but instead works toward steady investment growth.”

The fund’s assets were invested across just 60 holdings (stocks, bonds, and cash) as of March 2016, two lower than a quarter ago, and it was managing assets worth $25.9 billion as of March’s end.

As of its March portfolio, HCAIX’s equity holdings included NIKE (NKE), Netflix (NFLX), O’Reilly Automotive (ORLY), Bristol-Myers Squibb (BMY), and Kroger (KR). These stocks made up a combined 10.9% of the fund’s portfolio.

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Historical portfolios

For this analysis, we’ll be considering HCAIX’s holdings as of December 2015, as that is the latest available sectoral breakdown for the fund. Its holdings post-December reflect the valuation-driven changes to its portfolio, not its actual holdings.

HCAIX is heavily invested in the information technology and consumer discretionary sectors. The former commands nearly 40% of the fund’s assets. The latter makes up over 30% of the fund’s assets. The healthcare sector is a distant third and the only other sector whose portfolio weight reads in the double digits. The fund is not invested in the telecommunications services or utilities sectors.

Compared to the Russell 1000 Growth Index, the fund is sharply overweight in the information technology and consumer discretionary sectors. Meanwhile, it’s substantially underweight in the consumer staples, industrials, and materials sectors.

Over the last year, the fund has increased its exposure to its top two sectors. At the same time, it has reduced its exposure to the energy, healthcare, and industrials sectors.

How has the fund’s portfolio positioning impacted its 1Q16 returns? Let’s look at that in the next article.

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