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Mid Cap Growth Fund —
Fund performance outpaces mid cap growth index
2nd Quarter, 2015
"We remain reasonably constructive on the U.S. economy. "
– Wellington Management Company LLP

The domestic mid cap market gave back a portion of its strong Q1 2015 returns in the face of rising volatility and questions about economic growth. The Russell Midcap® Index, a measure of mid-size company stock performance, was down more than 1% during the quarter, led lower by stocks in the Energy, Industrials, and Financials sectors.
The Harbor Mid Cap Growth Fund delivered a 2.15% return in the quarter, easily outpacing the -1.14% return of its benchmark, the Russell Midcap® Growth Index. Adding to a strong first quarter, the Fund was up 7.75% on a year-to-date basis, more than 3.5% over the index for the period. Allocations to Consumer Discretionary, Health Care, and Financials were positive contributors while select Fund holdings in the Information Technology sector weighed on performance during the second quarter.
Stock selection continues to be the key determinant of portfolio success, according to Portfolio Manager, Michael Carmen. He pointed to the strong performance of Nomad Foods which was involved in an acquisition in the frozen foods space, where Carmen sees more opportunities for consolidation. He also highlighted the recovery in the earnings of Netflix, which resulted in a rising stock price. Carmen elected to trim the position into the strength, yet retains an overweight position in the stock based on his expectations for continued earnings improvement.
Michael Carmen’s comments were made in a July 15, 2015 interview. Highlights adapted from the interview appear below. All comments relate to the quarter ended June 30, 2015 unless otherwise indicated. All references to year-to-date are for the period January 1 through June 30, 2015.

Interview Highlights

Future Opportunities in Health Care and Information Technology
I think we are at a profound period in the development of both the Health Care and Information Technology sectors, where we are seeing some of the best innovations that we have seen in our careers. In Health Care, developments of new drugs and the ability to create more digitization are having significant impacts; while in Technology, the emergence of smartphones in developed and emerging markets, and the ability to create business models off of these technologies is driving new growth opportunities.
Consumer Discretionary Stocks Remain Attractive
We have been finding some good, solid ideas over the last several months in the casual dining area. In simple terms, it is one of the few areas that cannot be disintermediated by the internet. With the economy doing well, people are dining out more and we are seeing concepts that we think have some great legs for growth. We have added to our position in Chipotle on recent weakness. We have owned Panera for a while and they are transforming their dining experience which we believe will impact same store sales as well as margins.
Relative Attractiveness of the U.S. Versus the Rest of the World
We remain reasonably constructive on the U.S. economy. What I like about the U.S. is that it will have sustainable growth with very little apparent excesses, and this has happened in spite of a global economy that has had a lot of fits and starts and pockets of weakness over the last couple of years. Thus, our exposure is mostly on the U.S. side, though we will take advantage of situations that we think can be exploited on a global basis.
Outlook for the Second Half of 2015
We believe the portfolio is well positioned for future growth and that high quality growth companies within industries displaying secular growth trends will continue to be rewarded. While we cannot predict market outcomes, we can continue to identify attractively valued companies with accelerating revenues that we believe will add value to the portfolio in the long run.

Performance data shown represents past performance, which is no guarantee of future results. Current performance may be higher or lower than the past performance data shown. Investment returns and the value of an investment will fluctuate, and an investor's shares, when sold, may be worth more or less than their original cost. You can obtain performance data current to the most recent month-end (available within seven business days after the most recent month-end) by calling 800-422-1050 or visiting

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.