EXCO Resources Inc (XCO), Dynegy Inc. (DYN), First Bancorp (FBP): Billionaire Howard Marks’ Top 3 Picks Are All Small-Caps

Howard Marks’ Oaktree Capital Management disclosed on Tuesday its long equity positions for the second quarter of 2014. The fund acknowledged owning a highly diversified equity portfolio, with a market value of more than $5.74 billion. Oaktree is a Los Angeles-based investment firm that specializes in alternative investments and maintains an emphasis on distressed debt, corporate debt and convertible securities. Within equities, the fund focuses on companies that are less known by major investors and other funds, and are generally considered contrarian investments.

Between April and June, Oaktree started 20 new stock positions, increased its exposure to another 50 companies, and sold 22 of holdings. In this article, we will take a look at the fund’s top three positions, which saw some changes over the quarter.

OAKTREE CAPITAL MANAGEMENT

The fund’s most valuable position remained unchanged over the quarter. Oaktree still owns 45.17 million shares of EXCO Resources Inc (NYSE:XCO). Nonetheless, the market value of this position augmented, from $252.9 million (by March 31), to $266 million (by June 30), as the stock price rose by 6.9% over the second quarter.

EXCO Resources Inc (NYSE:XCO) is a $1.21 billion market cap oil and natural gas company that acquires, develops and explores onshore North American oil and natural gas properties. While most analysts recommend staying away from this deep-in-debt company, Oaktree – as previously said, a contrarian investor – seems to feel confident about its future.

Another major hedge fund that seems bullish about EXCO Resources Inc (NYSE:XCO) is Matthew Tewksbury’s Stevens Capital Management, which declared having more than quintupled its stake in the company over the second quarter. The fund now owns 62,297 shares of the oil and gas company.

Despite a 15% reduction in Oaktree’s position, Dynegy Inc. (NYSE:DYN) escalated from the fourth to the second spot on this list. This  $2.8 billion market cap power generation company saw its stock return more than 40% over the second quarter, so one can understand why Oaktree decided to sell some of its stock.

The fund now owns 6.94 million shares of Dynegy Inc. (NYSE:DYN). This position, worth roughly $241 million, accounts for 4.2% of the fund’s equity portfolio’s total value, and makes it the largest hedge fund shareholder of record – amongst those we track.

Similar is the case of Mark Weissman, Adam Cohen and David Coleto’s Caspian Capital Partners. The fund trimmed its exposure to Dynegy Inc. (NYSE:DYN) by 32% over the second quarter, but still owns $55 million in stock (1.59 million shares), which make it its largest equity position for the quarter.

The third position in this list also remained unchanged in relation to the previous quarter. First Bancorp (NYSE:FBPwitnessed no modifications in Oaktree’s 41.84 million shares stake. Same goes for the bet’s market value, which remained pretty much the same as in the first quarter: $227.6 million.

First Bancorp (NYSE:FBP) is a $1 billion market cap provider of financial services and products to retail, commercial and institutional clients, with operations in Puerto Rico, the United States, and the U.S. and British Virgin Islands.

I should mention that Oaktree is the largest hedge fund shareholder of record in First Bancorp (NYSE:FBP), trailed by Emanuel J. Friedman’s EJF Capital, which disclosed a 12% decrease in its stake in the company over the second quarter. The fund now owns 8.8 million shares of this regional bank, worth $47.9 million.

Disclosure: Javier Hasse holds no position in any stocks or funds mentioned.

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