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Five Stocks Billionaire Howard Marks Is Bullish On: Latin America Takes The Lead

Oaktree Capital Management, the fund ran by billionaire investor Howard Marks, recently filed its 13F for the second quarter, disclosing its long equity stakes as of June 30. As per the document, the firm held an equity portfolio valued at more than $5.55 billion at the time, with a slight focus on information technology (21% of the total value), consumer discretionary (18%), and financial stocks (16%). In this article we will take a look into five bullish moves from this hedge fund manager, which has a penchant for distressed-debt, high-yield bonds and value investing.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).

OAKTREE CAPITAL MANAGEMENT

Vale SA (ADR) (NYSE:VALE)

 – Number of shares owned by Oaktree (as of June 30): 10.19 Million

 – Value of Oaktree’s holdings (as of June 30): $32.87 Million

Let’s start with Brazil’s Vale SA (ADR) (NYSE:VALE), which saw Oaktree boost its exposure by roughly 8% during the second quarter, to 10.19 million shares. The largest shareholder among the 24 funds in our database long the stock was Jim Simons’ Renaissance Technologies, with 18.33 million shares worth $89 million at the end of June. Shares of Vale SA (ADR) (NYSE:VALE) have gained more than 65% year-to-date, including 12% since the beginning of the third quarter. In fact, the stock tumbled by roughly 13.75% over the past month. Recently, the Brazilian government has granted the company a 10-year license to operate a branch line that connects its S11D iron ore mine project and the Carajas Railway. S11D is expected to contribute about 90 million metric tons of iron ore per year.

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Cemex SAB de CV (ADR) (NYSE:CX)

 – Number of shares owned by Oaktree (as of June 30): 6.77 Million Shares + 96.26 Million Bonds

 – Value of Oaktree’s holdings (as of June 30): $139.21 Million

Next up is Cemex SAB de CV (ADR) (NYSE:CX), which saw its Series A Sponsored ADRs gain more than 37% over the first half of 2016. Over the second quarter, Oaktree augmented its stake in Series A Stock by 4%, while trimming its exposure to company bonds by the same percentage. Also long the stock of the Mexican company were Ken Griffin’s Citadel Advisors, with approximately $104.36 million in shares and bonds, and Ken Fisher’s Fisher Asset Management, with 7.18 million shares, valued at $47 million as of June 30. Cemex SAB de CV (ADR) (NYSE:CX) has had a great third quarter, having experienced a 30% surge in value. Most recently, the stock spiked after one of its US subsidiaries inked an agreement to sell certain cement assets to Eagle Materials for roughly $400 million.

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Itau Unibanco Holding SA (ADR) (NYSE:ITUB)

 – Number of shares owned by Oaktree (as of June 30): 6.73 Million

 – Value of Oaktree’s holdings (as of June 30): $57.82 Million

Back to Brazilian stocks, we’ve got Itau Unibanco Holding SA (ADR) (NYSE:ITUB). Between April and June Oaktree upped its stake by 9%, disclosing ownership of more than $57.8 million in stock as of June 30. A total of 21 other funds among those we track were long the stock, including John Horseman’s Horseman Capital Management, which initiated a position comprising 4.0 million shares over the quarter. Itau Unibanco Holding SA (ADR) (NYSE:ITUB) has gained more than 69% over the year, largely helped by what some analysts believe is a political stabilization of Brazil, and plenty of speculation. Quite recently, JPMorgan’s Pedro Martins assured “There is ample room for foreign and domestic long-only investors to add to Brazil equities…. “There is no doubt the investment thesis becomes simpler: lower political risk, falling interest rates and cyclical economic recovery,” he explained, citing Itau as an attractive investment option with a high beta. Shares of the Brazilian bank are up 17% since the beginning of July.

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Ally Financial Inc (NYSE:ALLY)

 – Number of shares owned by Oaktree (as of June 30): 10.4 Million

 – Value of Oaktree’s holdings (as of June 30): $177.55 Million

After a 9% increase in exposure over the second quarter, Ally Financial Inc (NYSE:ALLY) was the second-largest position in Oaktree’s portfolio, accounting for more than 3% of its value. Among the 48 other funds long the stock were Harris Associates, with 23.51 million shares and Richard Perry’s Perry Capital, which held 15.75 million shares. Ally Financial Inc (NYSE:ALLY) has been quite volatile this year, ultimately gaining just around 1%. However, since the third quarter started, the stock has gained around 10%, driven by the approval of a quarterly dividend of $0.08 per share and $700 million in buybacks, better-than-expected results for the second quarter (EPS of $0.54 beat estimates by $0.03, while revenue of $1.36 billion was $30 million higher than expected), and the prospect of a potential inclusion of the company in the S&P 500.

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Tribune Media Co (NYSE:TRCO)

 – Number of shares owned by Oaktree (as of June 30): 14.17 Million

 – Value of Oaktree’s holdings (as of June 30): $555.5 Million

Finally, there’s Tribune Media Co (NYSE:TRCO), Oaktree’s largest equity stake. During the second quarter, the fund acquired 1,892 shares of the company, holding a position that accounted for almost 10% of its equity portfolio at the end of June. Interestingly, 23 funds in our database held more than 37% of the company’s float. Another bull was Mason Hawkins’ Southeastern Asset Management, which declared owning 4.14 million shares as of June 30. Shares of Tribune Media Co (NYSE:TRCO) have risen more than 6% year-to-date, but lost about 8% since the beginning of the third quarter. However, most recently, the stock has been helped by the settlement of a tax dispute related to the $650 million sale of Newsday. According to the resolution, the company will pay roughly $200 million to the IRS, to cover capital gains taxed owed on the transaction.

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Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.

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