Howard Marks’ Oaktree Capital Management this month filed its latest 13F, disclosing its long positions held at the end of 2014. In a recent interview with The Manual of Ideas, an excerpt from which can be seen on YouTube, Marks explained some of his philosophy and beliefs behind investing, and in particular, one’s approach to investing.
Marks admitted that investment ideologies that he once shunned or said could not work, like algorithmic trading, have been successfully implemented by other traders; in that case by Jim Simons’ Renaissance Technologies, and Stan Druckenmiller’s Duquesne Capital. Marks stressed that it’s not so much the approach one takes, but rather taking the right approach to fit the investor’s personality and strengths, and sticking with it.
“I think the key is number one, to have an approach: well thought-out, hopefully over some years or decades. Hold it strongly; as the memo says, be willing and able to hold through the periods when it’s not working, cause nothing works in every market, nothing works at every stage in the cycle, and nothing works every year[…],” Marks said.
Marks described himself as a conservative investor, who is better suited to sealing off the downside, than finding the upside. With that in mind, let’s take a look at Mr. Marks equity portfolio at the end of 2014, which included two new positions that both leapt to the top of his portfolio in terms of value, and by a considerable margin. In fact, both new positions take up a larger chunk of his portfolio than any other position he’s held in the past two years, since he sold off much of his stake in Charter Communications, Inc. (NASDAQ:CHTR) during the first quarter of 2013.
First up is STORE Capital Corp (NYSE:STOR), in which Marks now has an 82.15 million share stake valued at $1.78 billion. That position totals 18.97% of the value of his entire equity portfolio. In this case, there’s a good reason for the bullish ownership, which is that STORE is actually a real estate investment trust (REIT) that was backed by Oaktree themselves in 2011. STORE, an acronym for Single Tenant Operational Real Estate, is a net-lease managed REIT, with a portfolio that consisted of 850 properties as of September 30, 2014, the majority of which were “profit centers”.
STORE has enjoyed a strong debut on the NYSE since going public, with shares trading up 14.26% since its IPO in the middle of November, including a 3.1% gain year-to-date. STORE proved to be a popular pick among other funds we track as well, with seven other funds holding new positions in the company at the end of 2014.
Tribune Media Co (NYSE:TRCO) is Marks’ second new position, with him reporting ownership of 18.77 million shares at the end of 2014, which has since been raised slightly to 18.79 million shares, per a February 13 filing. Tribune’s swan dive of 33% from the middle of July to the middle of October, in the midst of spinning off its publishing arm into a separate business, created the perfect opportunity for investors to get in on the now-streamlined television and digital entertainment business at its lowest levels since mid-2013.
Marks’ investment made him the largest shareholder of Tribune Media among institutional investors at the close of 2014. Numerous other funds were bullish on Tribune Media, which counts WGN America and Sharenote as some of its brands, during the previous quarter. Angelo Gordon & Co. and Clifton S. Robbins’ Blue Harbour Group were two such funds, initiating 8.98 million and 3.12 million share stakes respectively. Shares of Tribune Media are up 6.27% year-to-date.
Star Bulk Carriers Corp (NASDAQ:SBLK) is an old favorite of Marks’, dating back to the third quarter of 2013. However it wasn’t until a year later that Marks became extremely bullish on the prospects for the global shipping company, which boasts a fleet of 101 vessels, with an aggregate capacity of 11.9 million deadweight tonnage (dwt).
In the third quarter of 2014, he purchased more than 45 million shares, taking an activist position in the company. He closed 2014 with the same 51.23 million shares he held at the end of the third quarter, but has since added even further to the position in 2015, disclosing the addition of another 30.90 million shares in the middle of January, bringing his total to 82.15 million shares, a 51.9% stake in Star Bulk.
The latest move followed a disastrous fourth quarter for Star Bulk shares, as they fell 41%, which has only been exacerbated by a further 32.77% tumble in 2015. The collapse comes amid dry bulk shipping rates plumetting to historic lows, a situation which has already led to the bankruptcy of three other bulk shipping companies. In an effort to mitigate some of their woes, Star Bulk and four other shipping companies struck an accord earlier this month that will see them form a new company called Capesize Chartering Limited to oversee and better coordinate the efforts of the five carriers.