Spiros 'Sig' Segalas: Harbor Capital Appreciation FundSpiros Segalas is the founding director, president and chief investment officer of Jennison Associates LLC, the Lexington Avenue in New York City-based registered investment adviser of growth-equity accounts, primarily for large institutions.
...Spiros 'Sig' Segalas: Harbor Capital Appreciation Fund
...Spiros Segalas is the founding director, president and chief investment officer of Jennison Associates LLC, the Lexington Avenue in New York City-based registered investment adviser of growth-equity accounts, primarily for large institutions.
It also has served as the investment subadviser to Harbor Capital Appreciation Fund
(HACAX) since May 90. Segalas graduated from Princeton University in 1955, and began his investment career as a research analyst with Bankers Trust Company in 1960.He would subsequently become a vice president and manager at Bankers Trust.Segalas served two years as an officer in the Navy, plus he has held several positions in the shipping industry.Segalas is a member of the New York Society of Security Analysts.
By the mid-1980s, Segalas
had developed a good reputation in the pension investments world, resulting in the 1985 acquisition by financial giant, Prudential Insurance Company
, who acquired the firm to help expand their role as an institutional money manager.In May 1990, Jennison
was appointed the investment subadviser to the Harbor Capital Appreciation Fund
, marking Segalas'
first mutual fund assignment.
The other notable mutual fund assignment came in December 1996, when Segalas
was appointed one of the investment subadvisers to the Masters'
Select Equity Fund (MSEFX).This fund divides its assets amongst six star managers, each with excellent long-term track records.Segalas
manages one-fifth of the Masters'
Select Equity Fund portfolio, which Like Harbor Capital Appreciation is 4-star rated overall (above average) for performance as adjusted for risk by Morningstar in relation to all domestic stock funds.
In addition to managing the Harbor Capital Appreciation Fund
and a portion of the Master's
Select Equity Fund, Segalas
is also the subadviser to a myriad of broker-sold funds under the Sun America and Prudential
seeks to achieve Harbor Capital Appreciation Fund
's long- term capital appreciation objective through investments primarily in common stocks of established companies - defined as those with market capitalizations of at least $1 billion.Normally, he
will invest at least 65% of assets in such securities, and through the years has consistently landed in the Morningstar large-cap growth equity style box.The latest snapshot of the portfolio indicates that Segalas
has 63% of assets invested in giant-cap stocks, 30% in large-cap stocks, and only 7% in mid-cap stocks, for a median market capitalization of nearly $59 billion (slightly above than the S&P
In selecting securities, Segalas looks for companies exhibiting superior sales growth, high returns on equity, strong balance sheets, strong management capability, a commitment to R&D, and unique marketing competence.Segalas
won't just buy any growth company, however.For a stock to make it into the portfolio it must be currently demonstrating superior absolute and relative earnings growth and be attractively valued in relation to its growth prospects.Segalas
gives earnings progression the most weight in the selection process, favoring companies in the early stages of their growth cycle. Jennison Associates
maintains that its investment philosophy is clearly focused and closely adhered to.Morningstar data shows that Segalas
has consistently maintained a slightly higher than average price-to-earnings (P/E) ratio as well as average 3-year earnings growth ratio.In other words, the stocks that Segalas
invests in tend to have faster earnings growth than the average stock in the S&P
500 index, but he's
willing to pay up a little in stock price to own the securities.That adds volatility but compared to his
large-cap growth peers, Segalas
takes 'average' relative risk. Segalas
will sell stocks when their growth expectations are not achieved or exceeded and will reduce a position in a stock when its reaches its price target or gets ahead of itself.Also, he
may lighten a position if something is not going right and then buy back shares if things straighten out.If stock fundamentals deteriorate Segalas
may sell a position, or he
may ditch a stock if he
finds something better in terms of appreciation potential. Segalas
likes to add to positions on price weakness if the price weakness is attributable to non-operating problems.The size of individual stock positions depends on Segalas' confidence in the company and its management, and he
won't buy a stock unless he's
visited the company.Nearly all the stock research that Segalas
relies upon is done internally.Emphasis is on trading quality, effective internal communications and bottom-up stock selection.
Morningstar assigns Harbor Capital Appreciation Fund
an above- average 4-star performance rating in relation to its category peers and all stock funds in the domestic stock fund universe.Relative to his
large-growth peers, Segalas
takes average risk but compared to all domestic stock funds, he
takes higher-than- average risk.Against both benchmarks, Segalas
has delivered above-average returns.
On a YTD basis as of 9-30-01, HACAX
is down 29.7%, faring a little better in the downturn than the large-cap growth fund average (-33.1%), but trailing the S&P
500 index by 9.3% as a result of its higher exposure to tech/growth.The chart at left shows that Segalas' long-term record is still solid, with a 14.3% average return over the past 10 years through 9-30-01.That's 1.7% a year better than the S&P 500
and 4.8% more per year than the average large-growth stock fund tracked by Morningstar.
If historical performance is an indication, Segalas
should be able to capture a fair share of return in the next upturn.In the up years of 94, 95, 97, 98 and 99 Segalas
ranked in the top one-third of the large-cap growth category for performance.He
won't necessarily be at the top, but he'll be up there.As his
2000 YTD performance shows he
won't necessarily be at the bottom in market downturns either, but he
might be in the neighborhood.So it's probably best to think of Segalas
as taking higher-than- average risk versus the average U.S. stock fund but historically coming through in terms of rewarding shareholders for added risk incurred.
Adding to this $8 billion fund's appeal is its low 0.64% expense ratio compared to 1.42% for the average domestic stock fund, per Morningstar.In addition to its expense advantage, the fund has ranked in the top 5% of all large-growth funds based on post-tax return.The fund's tax-efficiency ratio is over 85% for the 10- year period through 9-30-01, but note that tax efficiency hasn't been that great in recent years (3).Accordingly, Segalas'
fund may generate some capital gains for you - something to watch out for or at least recognize (so you can manage your tax situation).
Risk-tolerant, long-term investors seeking capital growth with no need for income have a solid choice in Mr. Segalas
and the Harbor Capital Appreciation Fund
.Go to www.harborfunds.com for further information.