(PUB) Investing 2015

13

November 2015

Morningstar FundInvestor

Harbor Capital Appreciation Surges Leaders & Laggards | Robert Goldsborough

Laggards Delafield DEFIX has posted a 12 . 4% loss, placing it at the bottom of its mid-value category and extending a track record that produced weak performance in 2013 and 2014 as well. Managers Dennis Delafield and Vince Sellecchia favor buying beaten-down small- and mid-cap firms in various stages of turnaround or restructuring, but they’ve had their share of misses lately, including Harsco HSC , Boardwalk Pipeline Partners BWP , Carpenter Technology CRS , and Wesco International WCC . One common thread among many of this concentrated fund’s struggling holdings is that they’re found in the industrials, basic materials, and energy sectors, which have been battered this year by weakness in China, energy price declines, and a strong dollar. T. Rowe Price Spectrum Income RPSIX has trailed almost two thirds of its peers in the multisector- bond category since the start of 2015 . This Bronze- rated fund of funds allocates tactically to T. Rowe Price mutual funds that invest in various asset classes, and the fund’s asset-allocation committee recently broadened its roster to 15 investable options, including five Morningstar Medalists. Although this fund normally does well when credit is weak—as has been the case this year—its higher-than-average equity stake ( 12 . 5% compared with low single digits for the category norm) has served as a headwind thus far this year. Third Avenue Value TAVFX has struggled in 2015 relative to the world-stock category, losing close to 4 . 3% and trailing more than nine out of every 10 peers. The concen- trated fund has faced multiple succession issues of late, but its current-year performance can be explained more by poor sector weightings, including stakes in basic materials and energy that exceed the fund’s bench- mark and its category average. Major detractors this year have included steelmaker POSCO PKX , energy firm Devon Energy DVN , senior-living-community operator Brookdale Senior Living BKD , forest products company Canfor , energy producer Apache APA , and waste-to- energy firm Covanta Holding CVA . K Contact Robert at robert.goldsborough@morningstar.com

Leaders Harbor Capital Appreciation HACAX , which has a Morningstar Analyst Rating of Gold, has had a banner year in 2015 , outperforming some 97% of its large- growth peers. When growth is in favor, this fund has the potential to take off. Manager Sig Segalas and his team favor well-known growth names. Helping to fuel the fund’s 11 . 5% return this year have been positions in a rebounding Amazon.com AMZN , Netflix NFLX , Alphabet GOOGL , Nike NKE , Facebook FB , and Salesforce.com CRM . Other strong picks have included Visa V, Mastercard MA , and Priceline PCLN . These holdings are consistent with Segalas’ preference for con- sumer-oriented technology and Internet companies. Vanguard Intermediate-Term Investment-Grade ’s VFICX emphasis on high-quality debt has helped it this year. The Silver-rated fund’s 2 . 1% return since the start of 2015 has bested fully 98% of peers in the corporate-bond Morningstar Category. Although the fund can lag its peers and benchmark during credit rallies, it generally shines during periods where credit is battered, as was the case earlier this year. Artisan Global Opportunities ARTRX has done a fine job this year relative to its world-stock peers. The Silver-rated fund’s 7 . 9% return since the start of the year has been good enough to top 96% of its cate- gory. Lead manager Jim Hamel has kept the fund’s foreign stake ( 42 . 5% as of the end of September 2015 ) below the category norm of 49% , which has helped to benefit this fund as U.S. stocks have out- performed foreign ones both this year and since this fund’s 2008 launch. Some of the fund’s winners this year have been Regeneron Pharmaceuticals REGN , Electronic Arts EA , Facebook, Alphabet, Direct Line Insurance Group, and Tencent Holdings.

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

ASTON/Montag & Caldwell 1 Fairholme Focused Income 1 Fidelity Overseas 1 T. Rowe Price Capital App 1 T. Rowe Price Global Tech 1 T. Rowe Price Media & Tel 1 Vanguard Interm-Term Invm 1 Vanguard Tax-Managed Bala 1 Brown Capital Mgmt Small 2 Clipper 2

Ten Worst-Performing Funds

Fund Name

YTD Cat Rank %

Delafield Fund

99 99 99 99 99 99 99 98 98 98

FPA Capital GoodHaven

Janus Contrarian T Longleaf Partners

Loomis Sayles Investment

Sequoia

Artisan International Inv Royce Micro-Cap Invmt Royce Special Equity Mult