In this piece, we will take a look at the ten best stocks to buy according to billionaire Howard Marks’ Oaktree Capital.
Howard Marks is an American billionaire who is the co-chairman and founder of Oaktree Capital — a hedge fund based out of Los Angeles, California, the United States. Mr. Marks is one of the richest people in the world, courtesy of his hedge fund which manages billions of dollars in capital.
The executive is a graduate of the illustrious Wharton School of the University of Pennsylvania, from which he received his bachelor’s degree in 1967, with a major in finance. Immediately after graduating, the now billionaire hedge fund executive would go on to attend another top business school, the Booth School of Business of the University of Chicago for his Master of Business Administration.
Mr. Marks started his career in finance in 1969, when joined Citibank and worked as an equity research analyst. During his time at the bank, he would go on to become its head of research and then as a vice president and senior portfolio manager. He would work at Citi for seven years before joining the Los Angeles based asset management firm TCW Group. Mr. Marks would work at this firm for another ten years, and focus his attention on distressed and high yield securities — both of which belong to entities that are facing financial problems and are as a result forced to issue debt with a high return.
During his time period at TCW, the executive would meet his future Oaktree Capital partners, and along with Bruce Karsh and other TCW principals, he would set up Oaktree Capital in 1995.
During a presentation at Wharton earlier this year, Mr. Marks shared his thoughts on risk and how investors should approach and manage it. He outlined that investors should focus on bets with asymmetric risk profiles — those which provide a higher return when compared to the downside. Rejecting the popular notion that volatility, or beta, is an indicator of risk, the billionaire hedge fund executive instead stressed that risk is the probability of permanently losing your capital.
Mr. Marks’ net worth stands at a cool $2.2 billion according to Forbes Magazine, and Oaktree Capital had a portfolio worth $8.6 billion by the end of this year’s second quarter. Some of the top companies in this portfolio, and ones that we will also take a look at in this piece, are Star Bulk Carriers Corp. (NASDAQ:SBLK), TORM plc (NASDAQ:TRMD), and Chesapeake Energy Corporation (NASDAQ:CHK).
Howard Marks of Oaktree Capital Management
Our Methodology
We took a look at Oaktree Capital’s latest regulatory filings to sift out which firms were on top of the hedge fund’s radar during this year’s June quarter. The companies were then analyzed through their financial performance and hedge fund sentiment generated via Insider Monkey’s Q2 2022 survey of 895 funds.
Best Stocks to Buy Now According to Billionaire Howard Marks’ Oaktree Capital
10. Hertz Global Holdings, Inc. (NASDAQ:HTZ)
Oaktree Capital’s Stake Value: $183 million
Percentage of Oaktree Capital’s 13F Portfolio: 2.83%
Number of Hedge Fund Holders: 49
Hertz Global Holdings, Inc. (NASDAQ:HTZ) is an American car rental company that serves customers all over the globe and is headquartered in Estero, Florida. The company operates through its own stores, licensees, and franchises, and it also sells cars.
Mr. Marks’ hedge fund held a $183 million stake in Hertz Global Holdings, Inc. (NASDAQ:HTZ) by the end of this year’s second quarter. This came through the fund owning 11 million shares of the company and it represented 2.83% of its investment portfolio. Insider Monkey’s Q2 2022 survey of 895 hedge funds outlined that 49 had also invested in Hertz Global Holdings, Inc. (NASDAQ:HTZ).
Hertz Global Holdings, Inc. (NASDAQ:HTZ) filed for bankruptcy during the coronavirus pandemic, and since then it is on a path to recovery. The firm’s H1 2022 revenues of $4.15 billion are a billion higher than the same period last year and its operating income of $1.3 billion is a nice metric after it barely broke even last year. Tigress Financial raised the company’s share price target to $34 from $32 in August 2022, citing optimism for demand and pricing growth.
Hertz Global Holdings, Inc. (NASDAQ:HTZ)’s largest investor in our database is Tom Wagner and Ara Cohen’s Knighthead Capital which owns 181 million shares that are worth $2.8 billion.
TORM plc (NASDAQ:TRMD), Star Bulk Carriers Corp. (NASDAQ:SBLK), and Chesapeake Energy Corporation (NASDAQ:CHK) are met by Hertz Global Holdings, Inc. (NASDAQ:HTZ) as a top Oaktree Capital stock pick.
9. Eagle Bulk Shipping Inc. (NASDAQ:EGLE)
Oaktree Capital’s Stake Value: $196 million
Percentage of Oaktree Capital’s 13F Portfolio: 2.27%
Number of Hedge Fund Holders: 18
Eagle Bulk Shipping Inc. (NASDAQ:EGLE) is a dry bulk ocean cargo transportation services provider. The company transports a variety of cargoes such as fertilizers, dry grain, coal, steel, cement, and forest products. It is headquartered in Stamford, Connecticut, the United States.
Eagle Bulk Shipping Inc. (NASDAQ:EGLE) capitalized on the uptick in global shipping earlier this year, as it posted record revenue of $199 million for its second fiscal quarter. The company also has one of the strongest dividends in the shipping industry, as it pays a $2.20 dividend for a whopping 21% yield.
Oaktree Capital owned 3.7 million Eagle Bulk Shipping Inc. (NASDAQ:EGLE) shares as part of its Q2 2022 holdings, allowing it to own a $196 million stake in the company that represented 2.27% of its investment portfolio. For the same time period, 18 of the 895 hedge funds polled by Insider Monkey had also held a stake in the shipping company.
Eagle Bulk Shipping Inc. (NASDAQ:EGLE)’s largest investor in our database after Oaktree Capital is John Overdeck and David Siegel’s Two Sigma Advisors which owns 226,579 shares that are worth $11.7 million.
8. Ally Financial Inc. (NYSE:ALLY)
Oaktree Capital’s Stake Value: $205 million
Percentage of Oaktree Capital’s 13F Portfolio: 2.38%
Number of Hedge Fund Holders: 42
Ally Financial Inc. (NYSE:ALLY) is an American digital financial services company that is headquartered in Detroit, Michigan. It serves the needs of a variety of industries including insurance, mortgage, and car financing. Its products include credit financing and term loans.
As the second quarter of this year came to an end, Oaktree Capital held a $205 million stake in Ally Financial Inc. (NYSE:ALLY). This came in the form of six million shares and it represented 2.38% of the firm’s investment portfolio. During the same time period, 42 out of the 895 hedge funds polled by Insider Monkey had also invested in the company.
Ally Financial Inc. (NYSE:ALLY) is highly exposed to the auto market, with 60% of its assets coming in the form of car loans or other similar products. This exposes the firm to bankruptcy risks should the auto market drop in the future. Piper Sandler reduced the company’s share price target to $31 from $34 in September 2022, stating that the costs of borrowing have gone up and funding costs for digital depositories have also grown.
Ally Financial Inc. (NYSE:ALLY)’s largest investor in our database of 895 hedge funds is Warren Buffett’s Berkshire Hathaway which owns 30 million shares that are worth $1 billion.
Oakmark Funds mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“As for Ally Financial, fears of a recession drove the stock price down more than 20% for the period, but business fundamentals have remained strong and the shares now trade for just a mid-single-digit multiple of current earnings. We believe today’s price ignores the funding cost improvements and well-capitalized nature of Ally’s balance sheet. We continue to own both investments given their significant discounts to our estimates of business value.”
7. Runway Growth Finance Corp. (NASDAQ:RWAY)
Oaktree Capital’s Stake Value: $238 million
Percentage of Oaktree Capital’s 13F Portfolio: 2.76%
Number of Hedge Fund Holders: N/A
Runway Growth Finance Corp. (NASDAQ:RWAY) is an investment company that targets the debts and loans of late stage and growth firms operating in the biotechnology, healthcare, life sciences, and information services industries. The firm is headquartered in Woodside, California, the United States.
Runway Growth Finance Corp. (NASDAQ:RWAY)’s second fiscal quarter saw the company make $200 million in new investment commitments and bring in a total investment income of $25 million for a 35% annual growth. B. Riley set a $12.5 share price target for the company in September 2022, stating that the firm has a healthy risk to reward ratio. Runway Growth Finance Corp. (NASDAQ:RWAY) pays a 33 cent dividend for a strong 11.6% yield.
By the end of this year’s June quarter, Mr. Marks’ hedge fund held a $238 million stake in the company that came through 21 million shares and represented 2.76% of its investment portfolio.
Runway Growth Finance Corp. (NASDAQ:RWAY)’s second largest investor in our database is Phillip Goldstein, Andrew Dakos, and Steven Samuels’s Bulldog Investors which owns 221,077 shares that are worth $2.5 million.
6. PG&E Corporation (NYSE:PCG)
Oaktree Capital’s Stake Value: $289 million
Percentage of Oaktree Capital’s 13F Portfolio: 3.36%
Number of Hedge Fund Holders: 51
PG&E Corporation (NYSE:PCG) is an American electricity and gas company that is one of the oldest of its kind since it was set up in 1905 and is currently headquartered in San Francisco, California, the United States. The firm operates through its subsidiaries which generate and transmit electricity and store and distribute natural gas.
Oaktree Capital owned 29 million PG&E Corporation (NYSE:PCG) shares as part of its Q2 2022 portfolio. This enabled it to hold a $289 million stake in the energy firm which represented 3.36% of its investment portfolio. For the same time period, Insider Monkey’s 895 hedge fund survey revealed that 51 funds had also invested in the firm.
PG&E Corporation (NYSE:PCG) has a customer base of 13 million people covering Northern and Central California. Out of its last three quarters, the firm has missed analyst earnings per share estimates for two. Morgan Stanley kept a $14 share price target for the company in September 2022, stating that PG&E Corporation (NYSE:PCG)’s addition to the S&P500 index will open up its shares to indexed portfolios.
PG&E Corporation (NYSE:PCG)’s largest investor in our database is Dan Loeb’s Third Point which owns 65 million shares that are worth $652 million.
Alongside Star Bulk Carriers Corp. (NASDAQ:SBLK), TORM plc (NASDAQ:TRMD), and Chesapeake Energy Corporation (NASDAQ:CHK), PG&E Corporation (NYSE:PCG) is a top Howard Marks’ stock pick.
5. Garrett Motion Inc. (NASDAQ:GTX)
Oaktree Capital’s Stake Value: $565 million
Percentage of Oaktree Capital’s 13F Portfolio: 6.57%
Number of Hedge Fund Holders: 23
Garrett Motion Inc. (NASDAQ:GTX) is an automotive company that sells products for commercial vehicles. The firm offers turbochargers for gasoline and diesel engines. It is headquartered in Role, Switzerland.
Mr. Marks’ firm held a $565 million stake in Garrett Motion Inc. (NASDAQ:GTX) as part of its Q2 2022 holdings. These came in the form of 68 million shares and represented 6.57% of its investment portfolio. For the same time period, 23 out of the 895 hedge funds polled by Insider Monkey had also invested in the company.
Garrett Motion Inc. (NASDAQ:GTX) is one of the largest players in the global turbocharger industry. This industry is worth $10 billion according to some estimates and it commands a 32% volume of this industry.
Garrett Motion Inc. (NASDAQ:GTX)’s largest investor after Oaktree Capital in our database is Mark T. Gallogly’s Centerbridge Partners which owns 66 million shares that are worth $544 million.
Alluvial Capital Management mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“Garrett Motion is an exercise in patience. Just as it seemed the global automotive market was about to recover to pre-COVID production, along came Russia, inflation, and the threat of recession. Still, the company is making great strides in improving and simplifying its balance sheet. In June, the company redeemed the rest of the Series B preferred shares it issued to Honeywell when it exited bankruptcy in 2021. With the Series Bs out of the way, Garrett Motion is free to dedicate its cash flow to continued deleveraging or share buybacks. At some point in the next year or two, the conditions will be met for Garrett Motion to convert these preferreds and simplify their capital structure. If the market stubbornly refuses to value Garrett Motion shares at a reasonable price, I believe the company will pursue a sale or merger. Until then, our preferred shares will continue to accrue dividends at an attractive yield. The preferreds are worth at least $15 today, and possibly $20 or more if the company can reduce leverage and/or buy back shares and the automotive market recovers.”
4. Vistra Corp. (NYSE:VST)
Oaktree Capital’s Stake Value: $580 million
Percentage of Oaktree Capital’s 13F Portfolio: 6.74%
Number of Hedge Fund Holders: 42
Vistra Corp. (NYSE:VST) is an American electricity and natural gas provider that serves customers in 20 states and the District of Columbia. The company has more than four million customers and tens of thousands of megawatts of electricity in its portfolio. It is headquartered in Irving, Texas.
Vistra Corp. (NYSE:VST) has the world’s largest electricity storage facility, which is capable of storing 75 megawatts in Moss Landing, California. Additionally, its free cash flow before growth is slated to touch a high end of $2.57 billion this year and its free cash flow at $1.22 billion. Vistra Corp. (NYSE:VST) also pays an 18 cent dividend for a 3.46% yield.
Oaktree Capital owned 25 million Vistra Corp. (NYSE:VST) shares by the end of this year’s June quarter. This enabled it to hold a $580 million stake in the company. Insider Monkey profiled 895 hedge funds for their holdings covering the same time period to discover that 42 had invested in the company.
After Oaktree Capital, Benjamin A. Smith’s Laurion Capital Management is Vistra Corp. (NYSE:VST)’s largest investor It has a $219 million stake that comes through 9.5 million shares.
3. Star Bulk Carriers Corp. (NASDAQ:SBLK)
Oaktree Capital’s Stake Value: $650 million
Percentage of Oaktree Capital’s 13F Portfolio: 7.55%
Number of Hedge Fund Holders: 18
Star Bulk Carriers Corp. (NASDAQ:SBLK) is a shipping company that is headquartered in Marousi, Greece. The firm ships dry bulk cargo such as iron, grain, fertilizers, and steel products through a fleet of more than one hundred ships.
Mr. Marks’ hedge fund held a $650 million stake in Star Bulk Carriers Corp. (NASDAQ:SBLK) for its Q2 2022 investments. This came in the form of the firm owning 26 million shares of the company. Insider Monkey scanned 895 hedge fund portfolios for this year’s second quarter to find out that 18 had bought the company’s shares.
Star Bulk Carriers Corp. (NASDAQ:SBLK)’s second quarter revenues saw the firm bring in $317 million in operating revenues and a net income of $164 million as it posted strong annual growth in both metrics. Jefferies reduced the company’s share price target to $26 from $30 in September 2022, stating that while coal shipment rates are growing, dry bulk shipments are dropping.
Star Bulk Carriers Corp. (NASDAQ:SBLK)’s second largest investor in our database is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital which owns one million shares that are worth $25 million.
2. TORM plc (NASDAQ:TRMD)
Oaktree Capital’s Stake Value: $727 million
Percentage of Oaktree Capital’s 13F Portfolio: 8.44%
Number of Hedge Fund Holders: 12
TORM plc (NASDAQ:TRMD) is a British shipping company that is responsible for shipping crude and refined oil all over the globe. The firm was set up in 1889, and it is based in London, United Kingdom.
TORM plc (NASDAQ:TRMD)’s second fiscal quarter saw the firm command nearly twice the charter rates that it had posted in the year ago quarter. By Q2 2022 end, the rates were $29,622 and at the end of Q1 2022, they stood at $14,591.
For its second quarter of 2022 investment portfolio, Oaktree Capital held a $727 million stake in TORM plc (NASDAQ:TRMD) which came through the firm holding 53 million shares of the company. Insider Monkey surveyed 895 hedge fund portfolios for their June quarter of 2022 investments to discover that 12 had also held a stake in the company.
Out of these, Jim Simons’ Renaissance Technologies followed Oaktree Capital as TORM plc (NASDAQ:TRMD)’s second largest investor through a $5.9 million stake that came through 438,040 shares.
1. Chesapeake Energy Corporation (NASDAQ:CHK)
Oaktree Capital’s Stake Value: $851 million
Percentage of Oaktree Capital’s 13F Portfolio: 9.89%
Number of Hedge Fund Holders: 67
Chesapeake Energy Corporation (NASDAQ:CHK) is an independent oil and gas exploration company that is headquartered in Oklahoma City, Oklahoma, the United States. The firm has hundreds of millions of barrels of oil equivalent proven reserves.
Mr. Marks’ hedge fund held an $851 million stake in Chesapeake Energy Corporation (NASDAQ:CHK) by the end of 2022’s second quarter. This represented 9.89% of the firm’s investment portfolio. Insider Monkey studied 895 hedge fund holdings for Q2 2022 to discover that 67 had invested in the firm.
Chesapeake Energy Corporation (NASDAQ:CHK)’s second quarter revenues were a breath of fresh air as by posting $1.2 billion in sales the company reversed a $439 million loss it had posted a year back. It also pays a 55 cent dividend for a 2.39% yield. Benchmark set a $137 share price target for the company in August 2022, stating that its return from bankruptcy is not reflected in investment models.
Chesapeake Energy Corporation (NASDAQ:CHK)’s second largest investor in our database is D. E. Shaw’s D E Shaw which owns 4.7 million shares that are worth $385 million.
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Disclosure: None. 10 Best Stocks to Buy Now According to Billionaire Howard Marks’ Oaktree Capital is originally published on Insider Monkey.
