News & Commentary

View all Commentary headlines

Large Cap Value Fund —
Lifted by Q4 advance, large cap value stocks return over 30% for 2013
4th Quarter, 2013
"Our fundamental philosophy is to look for high quality businesses where we see multiple catalysts for positive change that will happen, not in a single year, but over 5 to 10 years. We are always able to find companies that fit that mold. "
– Jim Henderson

With large cap stocks setting the pace, U.S. equities finished 2013 with a solid fourth quarter advance. The Russell 1000® Value Index, a measure of value-oriented U.S. large cap stocks, posted returns of 10.01% for the three months ended December 31, 2013, and 32.53% for the calendar year.
In this environment, the Harbor Large Cap Value Fund recorded strong absolute returns although it trailed the Russell 1000® Value benchmark. The Fund returned 8.56% for the fourth quarter and 30.10% for the year. The Fund is managed by Aristotle Capital Management LLC.
Stocks that boosted Fund performance in the fourth quarter included oil refiner Phillips 66, home builder Lennar, and software developer Adobe Systems, reports Jim Henderson, a Principal and Portfolio Manager with Aristotle Capital Management. Leading detractors in the quarter included beauty products maker Coty, along with Information Technology stocks eBay, EMC, and IBM.
Jim Henderson's comments were made in a January 13, 2014, interview. Highlights adapted from the interview appear below. All comments relate to the quarter ended December 31, 2013, unless otherwise indicated. All references to year-to-date are for the period January 1 through December 31, 2013.

Interview Highlights


Catalysts for positive change
Coming off a strong year like 2013, we're often asked, “Is the market overvalued? Are you able to find value?” Our fundamental philosophy is to look for high quality businesses where we see multiple catalysts for positive change that will happen, not in a single year, but over 5 to 10 years. We are always able to find companies that fit that mold.
Robust expansion
Information Technology, as a sector, is generally well rewarded in times of robust economic expansion. A lot of the products made by these companies are purchased by other businesses, and those businesses need to feel good about their underlying fundamentals before they open up the purse strings of capital expenditures. When the economy starts to improve, those businesses improve, and I think that was indicative of the 48% return that we saw in the Technology sector in 2013.
Performing in weaker markets
Typically in a year when markets are robust and driven by (a) momentum and (b) macroeconomic and geopolitical events, that is likely to be a time when we're going to just hang on and show pretty good returns - and then really earn our keep in years that aren't nearly as robust. Historically that been the philosophy of our firm and I think the track record bears that out.
Sector exposures
We have larger-than-index exposures in Information Technology and Consumer Staples stocks in the portfolio, while being underweighted in the Financials and Energy sectors. That has not changed a lot in the past several quarters and I don't expect it to change any time soon.
Value opportunities
The market was somewhat momentum-driven in 2013, and momentum tends to beget momentum. Companies that are strong in the marketplace for the most part are very highly correlated to others that are strong in the marketplace. Meanwhile, other companies are left behind because they don't fit that momentum criterion; for us as value managers that creates opportunities.

Performance figures discussed reflect that of the institutional class shares.

The views expressed herein are those of the portfolio manager at the time of the interview and may not be reflective of their current opinions or future actions.  These views are not necessarily those of the fund company and should not be construed as such.

This information should not be considered as a recommendation to purchase or sell a particular security and the holdings or sectors mentioned may change at any time and may not represent current or future investments.