Thu Apr 28 2016
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New Guru Spiros Segalas Consistently Beat Market Over the Short and Long Term

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A new guru, Spiros “Sig” Segalas, was featured in Barron’s recently as one of only four consistent market-beating managers to meet stringent criteria but somehow manage to fly under the radar.

Barron’s found Segalas while looking domestic stock funds that outperformed the Standard & Poor’s 500 index over the long term – one, three, five, 10 and 25 years – under the same manager. He has run Harbor Capital Appreciation (HCAIX), a firm with $ 25.7 billion in assets under management, since 1990. One of the managers Barron’s called “venerated by the industry, but not exactly household names,” Segalas beat the index over all time periods: In the short term with 11% versus 2.8% over one year, and over the long term with 11.8% versus 10% annualized over 25 years.

Segalas uses bottom-up analysis to evaluate companies, seeking strong balance sheets and capable management, but he also wants them to have above-average earnings growth potential and sales momentum. The strategy explains much of his more than tripling the market last year: 2015’s stock champions, Netflix Inc. (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN), stand out in his 10 biggest holdings. Alphabet Inc. (GOOGL) and Facebook Inc. (NASDAQ:FB) are at the top.

  • HCAIX 15-Year Financial Data
  • The intrinsic value of HCAIX
  • Peter Lynch Chart of HCAIX

At the end of the first quarter, the Harbor Capital Appreciation Fund had 39.4% of equity assets allocated to information technology stocks, followed by consumer discretionary at 32.2%. It has an adjusted price-earnings ratio of 29.03 and annualized turnover of 37%.

In the first quarter, Segalas bought five new stocks for the fund: McDonald’s Corp. (NYSE:MCD), The Home Depot Inc. (NYSE:HD), General Electric Co. (NYSE:GE), Biomarin Pharmaceutical Inc. (NASDAQ:BMRN) and Atlassian Corp. Plc (NASDAQ:TEAM).

McDonald’s Corp. (NYSE:MCD)

Segalas purchased 2,621,198 shares of McDonald’s Corp., a 1.3% portfolio weight. The first quarter’s average price per share was $ 119.

Mcdonald’s Corp. has a market cap of $ 115.68 billion; its shares were traded around $ 128.30 with a P/E ratio of 24.72 and P/S ratio of 4.78. The trailing 12-month dividend yield of McDonald’s Corp. stocks is 2.7%. The forward dividend yield of McDonald’s Corp. stocks is 2.79%. McDonald’s Corp. had an annual average earnings growth of 10.10% over the past 10 years. GuruFocus rated McDonald’s Corp. the business predictability rank of 2.5-star.

The Home Depot Inc. (NYSE:HD)

Segalas purchased 2,067,722 shares of The Home Depot Inc., a 1.06% portfolio weight. The price for the quarter averaged $ 125 per share.

The Home Depot Inc. has a market cap of $ 170.09 billion; its shares were traded around $ 135.75 with a P/E ratio of 24.88 and P/S ratio of 2.03. The trailing 12-month dividend yield of The Home Depot Inc. stocks is 1.8%. The forward dividend yield of The Home Depot Inc. stocks is 2.04%. The Home Depot Inc. had an annual average earnings growth of 6.2% over the past 10 years.

General Electric Co. (NYSE:GE)

Segalas purchased 3,294,669 shares of General Electric Co., a 0.39% portfolio. The stock’s average price for the quarter was $ 29.

General Electric Co. has a market cap of $ 288.6 billion; its shares were traded around $ 30.93 with a P/E ratio of 41.26 and P/S ratio of 2.62. The trailing 12-month dividend yield of General Electric Co. stocks is 2.99%. The forward dividend yield of General Electric Co. stocks is 2.98%.

Biomarin Pharmaceutical Inc. (NASDAQ:BMRN)

Segalas purchased 781,714 shares of Biomarin Pharmaceutical Inc., a 0.24% portfolio weight. The stock’s average price for the quarter was $ 82.

Biomarin Pharmaceutical Inc. has a market cap of $ 14.17 billion; its shares were traded around $ 87.72 with and P/S ratio of 15.75.

Atlassian Corp. Plc (NASDAQ:TEAM)

Segalas purchased 381,042 shares of Atlassian Corp. Plc, a 0.03% portfolio weight. The stock’s average price for the quarter was $ 23.

Atlassian Corporation Plc has a market cap of $ 5.03 billion; its shares were traded around $ 23.66 with a P/E ratio of 262.90 and P/S ratio of 20.44.

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