Billionaire Howard Marks’s Best Contrarian Investments: Charter Communications, Inc. (CHTR), Delphi Automotive PLC (DLPH)

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For the average investor, capitalizing on the trading strategies of a hedge fund seems unlikely without a substantial investment, sometimes as high as a $1 million minimum. Fortunately, at Insider Monkey, we track 450 of the world’s most elite hedge fund managers, and share the equity holdings of these elite investment “clubs.” For more than a decade in our back tests, our best premium strategy beat the market by 18 percentage points a year, and since we’ve started sharing these picks with the public, it has outpaced the S&P 500 by more than 20 percentage points in just six months (learn how to use this strategy yourself).

OAKTREE CAPITAL MANAGEMENTFurthermore, it’s also crucial to look at each of the funds we track individually, and by using the latest round of fourth quarter 13F data from the SEC, we can determine how hedgies were preparing for 2013. Let’s take a look at one fund in particular: Howard Marks’s Oaktree Capital Management. Here are his top five equity positions beginning with No. 1.

Starting with Charter Communications, Inc. (NASDAQ:CHTR) at the number one spot for Oaktree, the cable and entertainment company seems to be trading oblivious to what analysts have been saying about the stock, from rumors of another Chapter 11 filing, to being overbought, to just a general underperforming stock.  Fortunately for Charter, Oaktree has been labeled a “contrarian” fund that often finds value in what others might dismiss.

From a technical standpoint, at $88.00 per share, Charter does look poised for profit-taking and some analysts have pegged its fair market value at around $75.00.  However, with very respectable 4th quarter results (revenues up 4.3% from the 3Q 2012), Charter will likely not spend very long below $80.00.

Number two in Oaktree’s top five is EXCO Resources Inc (NYSE:XCO). The oil and natural gas developer had a rough start this year, hitting its low for the year at $6.12 on 2/21/13.

And although the stock has rebounded, there is still cause for concern given the very poor financials that came out at year end.  Revenue is down by 27% from 2011, net income has slipped into negative territory and most analysts have turned bearish on the stock since the start of this year.

The auto parts manufacturer, Delphi Automotive PLC (NYSE:DLPH) is number three on Oaktree’s top five. Interestingly, a closer look at the company’s financials reveals some cracks in the façade: growth appears to be stalling and operating cash flow is weak.  On the bright side, earnings of 90 cents per share beat analyst’s expectations by three cents last quarter. Technically, there is still room for more upside to around $45, but profit-taking could push it back to around $40 a pop.  Keep in mind that Marks tends to be a contrarian, so if the stock looks too good to be true, Marks will likely think that it is.

Who’s No.’s 4 and 5?

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