Betting on Colleges, Correctional Facilities; RS Partners Finds Big Value in Small-Caps
For managers of the RS Partners Fund, the second-best performing U.S. small-company value mutual fund since 2001, only two things are certain this year: jail and school.</br></br>Andrew Pilara, 64, who oversees the $2.3 billion fund (RSPFX), is bullish on Corrections Corp. of America, the country's largest operator of jails and prisons, and Corinthian Colleges Inc., which runs 97 schools across the United States.</br></br>While most companies will post smaller earnings gains in 2006 as consumer spending weakens, companies such as Corrections Corp. and Corinthian Colleges will keep growing, said Pilara, who co-manages the fund with Joe Wolf, 34, and David Kelley, 35. Demand for their services isn't dependent on the economy, Pilara said.</br></br>"Our caution led us to businesses that aren't economically sensitive," he said in an interview from his office at RS Investments in San Francisco. Pilara expects rising commodities prices to hamper U.S. growth, while economists are forecasting that the first quarter will show the biggest gains in two years.</br></br>The RS Partners Fund climbed 14 percent in the past year. Much of the gain came from energy-related companies such as Compton Petroleum Corp. and Paramount Resources Ltd., which increased as oil and natural gas prices rose to records.