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Summary: Oakmark Funds with $48 billion in assets under management offers top-rated Mutual Funds for Individual Investors. Their major new conviction buys include managed healthcare services company UnitedHealth Group Inc. (NYSE:UNH), U.S. oil and gas exploration and production company Range Resources Corp. (NYSE:RRC), Visa Inc. (NYSE:V) and futures exchange CME Group Inc. (NASDAQ:CME). Their major new conviction sells include Microsoft Corp. (NASDAQ:MSFT) and Hewlett Packard Co. (NYSE:HPQ).

Chicago-based Oakmark Funds, now known as Harris Associates LP, manages $48 billion in assets, including $34 billion in equity assets. Harris Associates serves as the adviser to Oakmark’s mutual funds and also offers separately managed accounts for Institutions. Oakmark offers seven mutual funds, six of which are ranked four stars and above by Morningstar. Their largest equity mutual fund, Oakmark International I with $8.6 billion in assets has generated 8.5% compound returns in the last ten years, ranking it in the 9th percentile in its category. Also, the Oakmark Global with $3 billion in assets has been ranked by Kiplinger as one of their 25 favorite mutual funds. The funds follow a disciplined value investment philosophy and process in making their investments.

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:

Technology Sector: They sold $400 million from their prior quarter $5.1 billion position in the Technology Sector, including selling $482 million in Microsoft Corp. (MSFT), selling $184 million in Hewlett Packard Inc. (HPQ), and adding a minor $120 million to their prior $636 million position in Texas Instruments Inc. (NASDAQ:TXN). The position in MSFT was initiated in 1999 probably in the mid-$30s, so the selling in the mid-$20s more than a decade later is a conviction move on their part, indicative of their bearishness on the stock going forward. Similarly, the selling out of their position in Hewlett-Packard Co. is another conviction sell as they bought it in 1999 probably in the mid-$40s, so their sell last quarter at a break-even to a minor loss over holding it for more than a decade is indicative of their bearishness on this stock.

Healthcare Sector: They sold $240 million from their prior $4.3 billion position in the Healthcare Sector, including selling $460 million in Irish Medical Devices developer Covidien Plc (NYSE:COV) and balanced by a $343 million buy in managed healthcare services provider UnitedHealth Group (UNH). The position in COV was bought in the summer of 2007 in the low-$40s, so the selling of a portion of that position in the mid-$50s during the quarter appears to be just profit-taking. The position in UNH was just initiated in the December 2010 quarter in the high-$30s, so them adding more in the high-$40s in March 2011 quarter is a conviction buy.

Energy Sector: They added $390 million to their prior $3.8 billion position in the Energy Sector, including buying $367 million in U.S. oil and gas exploration and production company Range Resources Corp. (RRC). This position was initiated at the end of 2010 in the mid-$40s, so tripling that position by buying more shares in the mid-$50s is a conviction buy.

Finance Sector: They added $1.3 billion their prior $4 billion position in the Finance Sector, including buying $366 million in Visa Inc. (V), $354 million in CME Group Inc. (CME) that is an operator of two futures exchanges for the trading of benchmark products across major asset classes, and adding $252 million in Wells Fargo & Co. (NYSE:WFC). The position in V was an addition to their prior $6 million position in the company and is a conviction buy. The position in CME was initiated in early 2009 near $200 range, so the addition of a significant $354 million to their prior $154 million position with the stock trading in the $300 range last quarter is a conviction buy.

Capital Goods Sector: They sold $680 million from their prior $4.7 billion position in the Capital Goods Sectors, including selling $324 million in Rockwell Collins Inc. (NYSE:COL) that manufactures communications systems used in military and commercial aviation and in ground and shipboard applications, and selling $294 million in construction and mining equipment company Caterpillar Inc. (NYSE:CAT). The position in COL was initiated in the 2001 in the high-teens so the selling in the $60s was profit-taking. The position in CAT was initiated in spring of 2004 in the $40s, so the selling above $100 was 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

Microsoft Corp.

MSFT

Cut

$ 138 million

($482) million

0.39%

0.06%

Covidien Plc

COV

Cut

$ 246 million

($462) million

0.70%

0.96%

Range Resources Corp.

RRC

Add

$ 416 million

$367 million

1.18%

4.43%

Visa Inc.

V

Add

$ 372 million

$366 million

1.06%

0.97%

CME Group Inc.

CME

Add

$ 509 million

$354 million

1.45%

2.52%

UnitedHealth Group Inc.

UNH

Add

$ 474 million

$343 million

1.35%

0.97%

Rockwell Collins Inc.

COL

Drop

$ 0 million

($324) million

0.00%

0.00%

Unilever Plc.

UL

Cut

$ 117 million

($294) million

0.33%

0.30%

Caterpillar Inc.

CAT

Cut

$ 122 million

($287) million

0.35%

0.17%

Pepsico Inc.

PEP

Add

$ 276 million

$268 million

0.78%

0.27%

Wells Fargo & Co.

WFC

Add

$ 534 million

$251 million

1.52%

0.32%

Discover Financial Services

DFS

Cut

$ 162 million

($225) million

0.46%

1.23%

Mastercard Inc.

MA

Add

$ 637 million

$209 million

1.81%

2.10%

Hewlett Packard Co.

HPQ

Cut

$ 0 million

($185) million

0.00%

0.00%

Bard C R Inc.

BCR

Add

$ 208 million

$181 million

0.59%

2.45%

National Oilwell Varco Inc.

NOV

Cut

$ 305 million

($153) million

0.87%

0.91%

Weight Watchers Intl Inc.

WTW

Drop

$ 0 million

($131) million

0.00%

0.00%

Texas Instruments Inc.

TXN

Add

$ 757 million

$120 million

2.15%

1.89%

Western Union Co.

WU

Cut

$ 58 million

($108) million

0.17%

0.44%

Philip Morris Intl Inc.

PM

Add

$ 354 million

$105 million

1.00%

0.30%

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.

Source: Top Sector-Based Buys and Sells of Oakmark Funds