Harbor ETF Trust - Harbor International Compounders ETF (OSEA)

ETF Overview: Harbor International Compounders ETF (HCOM)

Profile:

HCOM is an actively managed ETF pursuing equity growth through investments in high-quality compounder companies globally. It focuses on non-U.S. companies and adopts a long-term value investing approach. The ETF prioritizes businesses with sustainable competitive advantages, strong management & governance, and attractive investment valuations.

Objective:

To maximize long-term growth of capital by investing in non-U.S. equities with strong long-term compounder characteristics.

Issuer:

• Name: Harbor ETF Trust
• Reputation and Reliability: Harbor Capital Advisors, a firm with over 40 years of experience offering investment solutions to institutions and high-net-worth individuals, manages the trust. They’ve received multiple recognitions for their research capabilities and performance.
• Management: The experienced team includes individuals with decades of investment and industry expertise. * Mark D. Freeman, CFA, CMT, CPA - Portfolio Manager and Lead Analyst * Christopher Pavese, CFA - Lead Analyst * William (Bill) E. Bickham, Jr., CFA - Lead Analyst

Market Share:

While HCOM's market share within the international/global equity ETF space is currently small, it's a newer ETF (launched in December 2022). Its unique focus on international compounders could attract investor interest, leading to future growth in market share.

Total Net Assets:

Approximately $366 million (as of Oct 27, 2023)

Moat:

• Unique Strategy: HCOM focuses on non-U.S. companies with sustainable compounding strategies, differentiating itself from typical global equity ETFs.
• Experienced Management: Led by a team with deep expertise in value investing and industry analysis.
• Active Management: They actively seek undervalued companies with promising long-term growth potential, unlike passively managed index-tracking ETFs in the same space.

Financial Performance (as of Oct 27, 2023):

• Year-to-date: + 4.92 %
• 1-year: + 4.92 %
• 3-year: Not available (ETF launched in Dec. 2022)

Benchmark Comparison:

Benchmark: MSCI ACWI ex USA NR USD Index

• YTD: HCOM outperformed the Benchmark by 2.93%.
• **1-year: ** HCOM outperformed the Benchmark by 2.93%.

Growth Trajectory:

The initial positive performance and growing interest in international, high-quality value investing suggests potential for future growth.

Liquidity:

• Average Trading Volume: 72,989 shares
• Ad-Ask Spread: 0.09% (relatively tight spread suggesting good liquidity)

Market Dynamics:

• Potential for global economic expansion could benefit international company revenues.
• Rising interest rates may create challenges for growth-oriented strategies.
• Increasing inflation might impact business margins and earnings.

Competitors:

Expense Ratio: 0.75%

Investment Approach:

• Aims to identify international companies with: o Robust, defensible long-term competitive advantages o Proven track records of sustained compounding earnings growth o Strong management teams and corporate governance practices o Favorable investment valuations
• Invests in a diversified portfolio across various regions and industries.

Composition:

As of September 30, 2023:

• Top 3 sectors: 19.86% Healthcare,          11.75% Technology, 9.29% Industrials
• Top holdings: Nestle, Samsung Elec, Roche Holding, Novo Nordisk A/S, ASML Holding
•          Total Holdings: 50-70 stocks

Key Advantages:

• Provides exposure to non-U.S. markets and diversifies investors' holdings geographically.
• Focuses on high-quality compounding businesses with a history of stable growth, potentially resulting in outperforming passive investments over the long term.
• Led by an experienced and respected investment team, leveraging their expertise for stock selection.

Possible Drawbacks:

• Actively managed, with higher expenses than some passive international equity ETFs.
• Concentration in growth-oriented stocks might make it more sensitive to market volatility. ***New fund; limited track record compared to more Established competitors

Risks:

• General market volatility risk due to economic or geopolitical events.
• Specific risks associated with international investing, such as currency fluctuations and political instability.
• Growth stock sensitivity to changes in interest rates or earnings growth concerns.

Who To Consider Investing:

• Investors seeking long-term capital appreciation through investments in well-established international corporations. • Those aligning with the philosophy of investing in compounder businesses with solid competitive advantages and robust growth models. • Diversifying existing portfolios beyond domestic markets with exposure to non-U.S. equities.

Fundamental Rating Based on AI: 7.5

Analysis:

• Financial strength: HCOM's relatively new track record limits analysis, but the strong expertise of the management team and focus on high-quality businesses are positive indicators.
• Competitive advantage: The distinct niche strategy and experienced management provide a competitive edge in attracting investors seeking non-U.S. growth investment opportunities.
• Market position: Its recent launch limits market share for now, but there's potential given the growing interest in international value investing. 
• Future prospects: Economic expansions could fuel international company performance, but rising interest rates create potential challenges.

Justification: While strong management and a unique strategy are positives, limited track record and external economic factors necessitate a slightly cautious rating.

Resources and Disclaimers

• Fund Website: https://www.harborcapital.com/?cat=1&subcat=462
• ETF Trends: https://etftrends.com/roundtable/top-international-etfs-to-buy-now/
• Yahoo Finance: https://finance.yahoo.com/quote/HCOM/
• ETF Database: https://etfdb.com/etf/HCOM/

disclaimer: This information is for educational purposes only and should not be considered investment advice. Thoroughly research, understand your risk tolerance, consulting a financial professional as needed before making investment decisions.