Harbor Capital: A Focus on Fast Growers

05/15/2018 5:00 am EST

Focus: FUNDS

Walter Frank

CIO, MONEYLETTER

Spiros “Sig” Segalas and Kathleen McCarragher together have guided Harbor Capital Appreciation Investor Class (HCAIX) for about 20 years, observes Walter Frank, mutual fund expert and editor of MoneyLetter.

Sig Segalas also is one of the founders of Jennison Associates (the fund’s subadvisor). He has been a manager of this fund since 1990. Kathleen McCarragher is also the head of growth equity at Jennison.

Jennison’s overriding philosophy in the large-cap growth space is to uncover “accelerating/long-term growth through fundamental research.” The managers look for companies with above-average revenue, earnings, and cash flow growth that will drive stock values upward.

They also look to capitalize on accelerating growth and the expected duration of growth that is not reflected in a stock’s value. The target: an expected growth rate that is 50% above the market overall.

Sector allocations are driven by the team’s bottom-up portfolio construction. The fund holds only 51 stocks, meaning it is fairly concentrated, with 38% of assets in the top ten holdings.

Many of the team’s growth picks historically have come from the technology sector, but the recent exposure to that sector is larger than has been typical. The fund’s near 50% weighting compares to a 38.7% weighting for the Russell 1000 Growth Index.

The second largest sector exposure, consumer discretionary is also overweight compared to the 18.6% stance of the Russell 1000 Growth. Meanwhile, the fund’s health care and industrials allocations are below that of the Index.

Looking at longer-term time frames, this fund lands within the top quarter of Morningstar’s large growth fund category for the trailing three, five, ten and 15 years.

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