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Inside the Harbor Capital Appreciation Fund Portfolio

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HCAIX: overview

The Harbor Capital Appreciation Fund Investor Class (HCAIX) “invests primarily in equity securities, specifically US 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 claim to invest in those companies that they believe have the following components:

  • 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 “the fund stays fully invested in stocks and does not try to time the market, but instead works toward steady investment growth.”

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The fund’s assets were invested across just 60 holdings (stocks, bonds, and cash) as of September 2016, and it was managing assets worth $25.4 billion as of the end of September. In the September portfolio, HCAIX’s equity holdings included Nike (NKE), O’Reilly Automotive (ORLY), Bristol-Myers Squibb (BMY), Netflix (NFLX), and FleetCor Technologies (FLT).

HCAIX’s portfolio changes

Tech stocks lie at the heart of HCAIX, making up 45% of the portfolio. Consumer discretionary and healthcare (in that order) are the fund’s other biggest sectors, and combined with information technology, these sectors make up 88% of HCAIX’s total assets. The fund is not invested in the telecom services and utilities sectors.

Compared to the Russell 1000 Growth Index, the fund is noticeably overweight the information technology, energy, and consumer discretionary sectors, but it is substantially underweight the consumer staples, industrials, real estate, and materials sectors.

We’ve looked at the fund’s quarterly portfolios for the past three years until September 2016. The tech sector was the sector with the most investments three years ago, but its portfolio weight has surged during this period. Three years ago, the sector made up 30% of total assets. Now it forms 45%. Exposure to consumer discretionary stocks has risen, whereas exposure to healthcare has fallen. Consumer staples and energy have seen their respective weights cut in half from three years ago, while industrials and materials have seen even sharper reductions.

But how has HCAIX performed so far in 2016, and what can its performance be attributed to? Continue to the next article to find out.

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