Fund Watch


Harbor Mid Cap Value Has Faith in Its Formula

Anjelica Tan

This fund’s managers look for good, cheap stocks with share-price momentum.



As a bull market keeps churning along, it gets harder to find cheap stocks. But the managers of Harbor Mid Cap Value (HIMVX) don’t seem to be having much trouble. Their secret: a numbers-based stock-picking system. It’s “a boring, conservative strategy,” says Josef Lakonishok, CEO of LSV Asset Management, which runs the fund. But it’s a strategy that delivers. Since the bull market began in 2009, Mid Cap Value has returned 32.4% annualized, outpacing the Russell Midcap index and 93% of its peers.

Lakonishok and two partners use computers to identify relatively cheap stocks with market values of $1 billion to $28 billion. They home in on key measures of value, such as price-earnings and price-to-cash-flow ratios. But they also want stocks that have been performing well recently. Those that score best make it into the fund. At last word, Mid Cap Value held 137 stocks.

One number the managers don’t care about is the price they paid for a stock. “We have no memory of what price we bought a company for,” says Lakonishok. And they don’t use price targets to determine when to sell a stock. Rather, they take into account the same factors they used when buying. If a stock becomes too expensive or it loses momentum, it becomes a candidate for selling. But the managers sell infrequently. The fund’s turnover ratio is 18%, implying an average holding period of almost six years. Top holdings include Ameriprise Financial and Helmerich & Payne, an energy-drilling company.

midsized funds

*Annualized for three and five years. @Rankings exclude share classes of this fund with different fee structures or higher minimum initial investments. **Closed to new investors. r Maximum redemption fee. -- Not available; fund not in existence for the entire period. Copyright 2014 Morningstar Inc.



Editor's Picks From Kiplinger


You can get valuable updates like Fund Watch from Kiplinger sent directly to your e-mail. Simply enter your e-mail address and click "sign up."

More Sponsored Links


DISCUSS

Permission to post your comment is assumed when you submit it. The name you provide will be used to identify your post, and NOT your e-mail address. We reserve the right to excerpt or edit any posted comments for clarity, appropriateness, civility, and relevance to the topic.
View our full privacy policy


Advertisement
Advertisement

Market Update

Advertisement

Featured Videos From Kiplinger