Harbor Small Cap Growth Opportunities Fund Institutional Class (HASOX)

Investment Strategy

The Fund invests primarily in equity securities, principally common and preferred stocks of small cap companies. Under normal market conditions, the Fund invests at least 80% of its net assets, plus borrowings for investment purposes, in securities of small cap companies.

The Fund defines small cap companies as those with market capitalizations that fall within the range of the Russell 2000® Growth Index, provided that if the upper end of the capitalization range of that Index falls below $2.5 billion, the Fund will continue to define those companies with market capitalizations between the upper end of the range of the Index and $2.5 billion as small cap companies. As of December 31, 2018, the range of the Index was $8 million to $6.2 billion, but it is expected to change frequently.

The Subadviser's investment strategy focuses on identifying rapidly growing small cap companies that are in an early or transitional stage of their development, and before their full potential is discovered by the market. The Subadviser utilizes bottom-up, fundamental research involving both quantitative and qualitative aspects to identify approximately 80 to 100 companies for investment by the Fund. The Subadviser uses quantitative analysis to identify potential companies for growth characteristics, such as:

  • Material revenue growth
  • Sustainable and/or expanding margins
  • Consistent earnings
  • Strong free cash flow generation

The Subadviser assesses the attractiveness of the valuation of these growth companies by analyzing a variety of valuation metrics, such as enterprise values relative to earnings and free cash flows, and price-to-earnings ratios, among others. The Subadviser then uses detailed qualitative analysis to further identify companies that possess the following characteristics:

  • Strong management teams
  • Well-defined business plans
  • Defensible market positions, such as higher barriers to entry
  • Potential for growth in the market for the companies' products and/or services

The Subadviser may sell a holding if the price target for the company is reached, the investment thesis for the company has fundamentally changed, the Subadviser becomes less comfortable with the company's management team and/or the Subadviser identifies more attractive investment opportunities.

Risks

Stocks of small cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies.

Stock markets are volatile and equity values can decline significantly in response to adverse issuer, political, regulatory, market and economic conditions.