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Summary: RS Investment Management with $12 billion in assets under management offers Mutual Funds for Individual Investors and Separately Managed Accounts for its Institutional Investors. It conducts its research and makes investment management decisions using a team-based approach, returning market-beating double-digit returns over the last 10 years. Their major conviction buys include Integrated Oil and Gas companies EQT Corp. (NYSE:EQT) and Questar Corp. (NYSE:STR), pharmaceutical company Warner Chilcott Plc (NASDAQ:WCRX), copper and gold miner Taseko Mines Ltd. (NYSEMKT:TGB) and chemicals manufacturer FMC Corp. (NYSE:FMC).

San Francisco, California-based RS Investment Management manages $12 billion in assets, including mutual funds as well as separate client-focused equity and fixed income portfolios for its Institutional client base, including pension and profit sharing plans, endowments and high net worth individuals. The firm pursues a team-based approach in conducting its research and making investment management decisions, including investment teams in the areas of value, core growth, growth, international, natural resources and fixed income.

This team-based approach seems to have paid off very well for RS Investment Management as the firm has attained market-beating double digit returns in the last 10 years. Their largest $2.9 billion RS Global Natural Resources Fund has generated 15.1% average annual returns versus 3.55% for the S&P 500. Similarly, their second and third largest $2.2 billion RS Partners Fund and the $2 billion RS Value Fund have generated 12.5% and 10.3% average annual returns over the last 10 years.

The fund holds a diversified portfolio of 360 equity positions, about 30% of that in large-caps, 50%-55% in mid-caps and the remaining 15%-20% in small-caps. Their portfolio turnover is 50%, implying an average holding period of six months. Based on the most recent SEC 13-F filing for the March 2011 quarter, we determined that their portfolio is over-weight in the basic materials sector and it is under-weight in Industrials, financial and energy sectors.

The following summarizes their largest new buys and sells in the latest reported 13-F filing for the March 2011 quarter and updated based on any 13-G filings since the end of the quarter:

  • Energy Sector: They added a minor $58 million to their prior $1.82 billion position in the Energy Sector. However, this was accomplished by significant re-shuffling of their Sector holdings, including adding new positions totaling $169 million in Integrated Oil and Gas companies EQT Corp. (EQT) and Questar Corp. (STR), selling $203 million in Canadian Oil and Gas company Talisman Energy Inc. (NYSE:TLM) , and selling off almost all of their $154 million holding in Oil and Gas Field Services Company Schlumberger Ltd. (NYSE:SLB). Both SLB and TLM were bought in mid-2006 in the mid-$60s and in the high teens respectively, both have been highly volatile since, including a 150%-250% move since early 2009, so the selling off of a portion or most of these positions after recovering from a huge ‘paper’ loss does not have much conviction.
  • Technology Sector: They sold $286 million from their prior quarter $2.34 billion position in the Technology Sector, including selling $201 million in Agilent Technologies Inc. (NYSE:A), $128 million in Atmel Corp. (NASDAQ:ATML) and $76 million in ACI Worldwide Inc. (NASDAQ:ACIW). This includes selling $37 million in ACIW since the end of the March 2011 quarter. Their position in A was initiated in the early 2009 in the mid-teens, so them taking $201 million off the table from a $321 million position in the $50s at a gain of over 150% in two years is probably just profit-taking. ATML similarly is also profit-taking as it was initiated in early 2007 in $5-$6 range. The position in ACIW was initiated in mid-2007 in the $30 range, and was sold after recovering from a huge paper-loss as the stock dipped to $9 range at the end of 2008.
  • Healthcare Sector: They added $65 million to their $975 million holdings from the prior quarter, including adding $125 million to their $35 million position from the prior quarter in Warner Chilcott Plc (WCRX), a developer of branded prescription drugs for women’s healthcare, dermatology, gastroenterology and urology.
  • Basic Material Sector: They added $180 million to their prior quarter $1.42 billion position, including adding $73 million in Taseko Mines Ltd. (TGB), a copper and gold miner with operations in British Columbia, Canada, and $89 million in FMC Corp. (FMC), a manufacturer of agricultural, industrial and specialty chemicals such as insecticides, herbicides and peroxygens. The position in TGB was initiated in mid-2010 in the $5 range and includes $29 million bought since the end of the March 2011 quarter. FMC was bought in mid-2008 in the $60s, and has been volatile since, so the addition of $89 million buy during the quarter has conviction.
  • Finance Sector: They sold $128 million from their prior quarter $2.24 billion position in the Finance Sector, including selling out of a $106 million position from the prior quarter in Whitney Holding Corp. (NASDAQ:WTNY), a South-east region bank that was recently acquired by Hancock Holding Company (NASDAQ:HBHC).
  • Consumer Cyclical Sector: They sold $74 million from their prior $622 million position in the Sector, including selling $100 million in BorgWarner Inc. (NYSE:BWA), a manufacturer of engine and drive-train components for light vehicle OEMs. The position in BWA was initiated at the end of 2008 in the $20 range, so their selling a portion of the position in the mid-$70s is profit-taking.

Table

Company

Ticker

Action

Market Value at end of March 2011 Quarter

Change in Value from Prior Quarter

Percent of Portfolio

Percent Shares Owned

New 13G 5% Ownership Change Filing Since End of March 2011 Quarter

Taseko Mines Ltd.

TGB

Add

$120 million

$73 million

0.97%

10.73%

ACI Worldwide Inc.

ACIW

Add

$90 million

($76) million

0.73%

8.26%

New Picks and Pans from March 2011 Quarter Filing

Talisman Energy Inc.

TLM

Cut

$ 104 million

($202) million

0.84%

0.41%

Agilent Technologies Inc.

A

Cut

$ 121 million

($201) million

0.98%

0.78%

Schlumberger Ltd.

SLB

Cut

$ 3 million

($151) million

0.02%

0.00%

Atmel Corp.

ATML

Cut

$ 293 million

($128) million

2.37%

4.69%

Warner Chilcott Plc

WCRX

Add

$ 159 million

$125 million

1.29%

2.70%

Whitney Holding Corp.

WTNY

Drop

$ 0 million

($106) million

0.00%

0.00%

BorgWarner Inc.

BWA

Cut

$ 159 million

($100) million

1.28%

1.82%

EQT Corp.

EQT

New

$ 97 million

$97 million

0.79%

1.30%

FMC Corp.

FMC

Add

$ 218 million

$89 million

1.77%

3.58%

Questar Corp.

STR

New

$ 72 million

$72 million

0.58%

2.32%

Waste Connections Inc.

WCN

Add

$ 77 million

$60 million

0.62%

2.35%

Abbott Laboratories

ABT

Drop

$ 0 million

($52) million

0.00%

0.00%

Goldcorp Inc.

GG

Cut

$ 52 million

($52) million

0.42%

0.13%

Acxiom Corp.

ACXM

New

$ 52 million

$52 million

0.42%

4.48%

Ameriprise Financial Inc.

AMP

Cut

$ 126 million

($51) million

1.02%

0.85%

Southwestern Energy Co.

SWN

Add

$ 358 million

$48 million

2.89%

2.39%

Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are my ‘opinions’ and I may be wrong. I may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to my thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Top Sector-Based New Buys and Sells of RS Investment Management