Excellent Stock Picking Works Wonders for HLMNX

The past one month has been relatively poor for the Harding Loevner International Equity Portfolio – Investor Class (HLMNX). However, for all other periods shown in the graph below, the fund is the top performer among its peer group of 12 funds chosen for this review. We have graphed its performance against two ETFs: the iShares MSCI ACWI ex U.S. ETF (ACWX) and the iShares MSCI EAFE ETF (EFA). Let’s look at what has contributed to this unparalleled performance by the fund in YTD 2016.

Tech stocks have engineered the fund’s strong performance in 2016 so far. ARM Holdings (ARMH) is head and shoulders above other positive contributors from the sector like Taiwan Semiconductor Manufacturing (TSM) and SAP (SAP). Had it not been for negative contributions from Baidu (BIDU), the sector would have posted an unblemished positive performance.

Japan’s MISUMI Corp and Canadian National Railway Company (CNI), among others, have powered industrials to the second position behind tech stocks. There was a small negative contribution from one stock, but it was negligible. Nestlé (NSRGF) has helped consumer staples contribute positively to the fund with assistance from L’Oréal (LRLCY) and Unilever (UL). Meanwhile, Schlumberger (SLB) and Royal Dutch Shell (RDS.B) have helped energy post healthy gains.

The important thing to note about the sectoral performance of HLMNX is that no sector has contributed negatively to the fund’s returns. Managers’ stocks picks, even from the financials and healthcare sectors, which have been pain points for several funds, have been able to eke out gains. Among financials, Itaú Unibanco Holding (ITUB) has outdone negative contributions from Allianz and ICICI Bank (IBN).

Even with just about 50 stocks in its portfolio, the HLMNX has outdone its peers in this review, which is a testimony to the stock picking ability of its fund managers. Importantly, its portfolio turnover is quite low, which means that managers have not run helter-skelter during testing times and have stuck with their stock picks. Conviction in stock choices doesn’t always work, but when combined with superior stock-picking ability, it works wonders for an actively managed portfolio.

Its strong performance is reflected in the fund’s asset size, which is over $6 billion, making it the largest fund in this review. This shows the belief of several investors in the fund’s performance.

Let’s now move on to the Ivy Global Growth Fund – Class A (IVINX).