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Cisco Systems, Inc. (CSCO), Oaktree Capital Group LLC (OAK): Hawkins Capital’s Bullish Five

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Hawkins Capital has some $1.4 billion under management; founded by Russell Hawkins in 2003, the hedge fund employs a long/short equity strategy. Hawkins runs a niche portfolio, with its top five stocks making up nearly 70% of the fund’s public-equity portfolio. Outlined below are Hawkins’ top five stock picks from the first quarter, many of which are under-the-radar picks–let’s check them out (see Hawkins’ portfolio here).

Oaktree Capital Group LLC (NYSE:OAK)

Hawkins’ top stock is Oaktree Capital Group LLC (NYSE:OAK), which makes up 17.2% of the fund’s portfolio. Oaktree Capital Group LLC (NYSE:OAK) is an investment-management firm focused on alternative markets. It specializes in credit and contrarian value-oriented investing. Oaktree Capital Group LLC (NYSE:OAK) also pays a 10.7% dividend yield.

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) is Hawkins’ second-largest stock holding, making up 16.5% of the portfolio. Royal Dutch Shell plc (ADR) (NYSE:RDS.A) is one of the six oil super-majors, operating as a major international integrated crude oil and natural-gas company that’s based in Europe. Shell also pays investors a 5%-plus dividend yield.

Part of what Shell has been up to of late is restructuring, including the sale of $8 billion in non-core assets. The oil company now aims to sell 15% of its refining capacity in Africa and Europe.

Shell expects to see meaningful contributions to future reserves from Canadian oil sands and its Marcellus gas position. This is part of the company’s move to reduce OECD refining exposure. Also, Shell is looking to increase its exposure in the East by expanding its gas-to-liquids portfolio in China.

Another one of Hawkins’ big stock holdings is Aon PLC (NYSE:AON), coming in third and making up 12.8% of its portfolio. Aon PLC (NYSE:AON) is a global provider of insurance brokerage services, while also offering consulting services and risk and insurance advice.

Revenue was up 2% in 2012, after a 33% advance in 2011, which was driven by the 2010 acquisition of the leading human resource consulting and outsourcing company, Hewitt Associates. With a rebounding economy, Aon should perform nicely on the back of an improving insurance market. The real long-term tailwind should be Aon’s acquisition of Hewitt Associates, which will allow the company to cross sell and generate across multiple product lines.

Aon trades at 20 times trailing earnings, but only 12 times forward earnings, suggesting the market might be overlooking Aon’s future growth. The company is expect to grow EPS at a five-year annualized rate of 10%, putting its PEG at 1.3.

Cisco Systems, Inc. (NASDAQ:CSCO is Hawkins’ fourth-largest holding, accounting for 11.1% of the portfolio. This tech giant is a market leader in the router and switching-products market. Cisco Systems, Inc. (NASDAQ:CSCO) has been seeing impressive revenue growth, with revenue up 6.6% in fiscal 2012. Revenue is expected to be up 5.3% in 2013 and 6.2% in 2014. The real tailwind to this growth is the rise in bandwidth usage, which in turn increases demand for Cisco Systems, Inc. (NASDAQ:CSCO) products.

Cisco Systems, Inc. (NASDAQ:CSCO) remains attractively valued, trading at 13.4 times earnings, while Juniper Networks, Inc. (NYSE:JNPR) is at 35 times and Microsoft Corporation (NASDAQ:MSFT) is at 18 times. Also, Cisco Systems, Inc. (NASDAQ:CSCO) pays investors a 2.8% dividend yield. Late last month, UBS reiterated its buy rating and lifted the price target to $26, representing 8% upside from current levels. UBS cites solid execution in terms of revenue and EPS growth, despite a soft macro-operating environment. Donald Yacktman of Yacktman Asset Management has one of the top positions in Cisco (check out Yacktman’s top stocks).

Rounding out Hawkins’ top five is Intel Corporation (NASDAQ:INTC), which accounts for 11% of the portfolio. Intel Corporation (NASDAQ:INTC), the world’s largest manufacturer of microprocessors, has seen weakness of late related to soft enterprise PC sales.

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