• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

A Must-Read Filing From a Value Pro

Howard Marks' Oaktree Capital has a track record of finding great underperformers.
By TIM MELVIN Nov 11, 2013 | 03:00 PM EST
Stocks quotes in this article: OAK, GNK, BALT, SBLK, CPLP, FBP, CZR, SWY, CHTR

Let me start the day as I do every year at this time, by mentioning how irritated I am that the U.S. stock market is open today. This is a day that when we should take a clue from the banks and the bond market and close, in order to honor all of those who have worn the uniform of their country over the decades. It is the right thing to do.

Having said that, let's move along to the continued flood of 13F filings that are rolling in as Wednesday's deadline approaches. One of my regular reads every quarter is that of Oaktree Capital (OAK) the distressed-asset and value firm led by veteran investor Howards Marks. Marks is one of those investors who has been around for a long time and has achieved a great deal of success in a wide variety of market conditions and economic backdrops. If you have not read his book, The Most Important Thing, I urge you to order it today. His quarterly letters on the firm's website also make for fantastic reading.

Most of the firm's investment activity involves debt instruments, but it does take significant equity positions, usually in sectors and stocks that are very cheap and out of favor. Oaktree has been very active in the shipping stocks for some time now, and it made some interesting moves in the quarter.

The Baltic Dry Index shot up in the quarter, and many of the shipping names soared during the first part of the year. Oaktree took advantage of the strength by selling its entire stake in Genco Shipping (GNK), which jumped 50% in the quarter, and trimming its position in Baltic Trading (BALT) by 30%. The firm still owns 900,000 shares of Baltic, and it is a stock I would love to buy on a significant decline in the sector or in the markets.

This is not to say that Oaktree is exiting the sector, however. The firm bought more than 21% of Star Bulk Carriers (SBLK) in the quarter, probably buying much of it during the recent stock offering. Star Bulk Carriers is using the offering to purchase nine new vessels. The CEO recently addressed the fleet additions as well as the expansion of the third-party fleet management business, telling investors, "We anticipate demand for dry bulk commodities from most developing countries to continue to grow and the freight market to start showing signs of improvement due to the lower order book, slow steaming and the scarcity of bank financing." Oaktree's Marks appears to agree, and so do I . Trading at 40% of book value, this stock has enormous upside potential in an economic recovery that strengthens the shipping industry.

Oaktree also purchased more than 900,000 shares of Capital Product Partners (CPLP). The firm is in the business of shipping oil and refined products and currently has a fleet of 27 ships. Although Capital Product Partners is not as cheap on a price-to-book-value basis as Star Bulk, the shares do pay a very generous dividend and currently yield 11%.

Oaktree also participated in a stock offering that allowed it to shed a portion of its stake in First Bancorp (FBP) the Puerto Rican bank it helped to recapitalize. Although Oaktree shed 17% of its holding, it still owns more than 20% of the bank, while Thomas Lee, a private-equity firm, also owns an additional 20%. The stock has pulled back from the offering price and is looking like a bargain once again at current prices. Aggressive, patient investors might want to look at the shares as a way to take advantage of the eventual financial fix that is sure to happen in the island territory at some point in the not-too-distant future.

Oaktree also exited its stake in the highly leveraged gaming concern Caesars Entertainment (CZR). The shares are up more than 200% in the past year, amid talks of restructuring the company and its horrendous debt load. Other significant sales in the quarter included Safeway (SWY) and Charter Communications (CHTR), as both are up big this year.

Howard Marks and his team of talented professionals have provided me with some great stock picks and even more invaluable insights into the markets. Their filings are on my must-read list and should be on yours as well.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Melvin was long SBLK and CPLP.

TAGS: Investing | U.S. Equity

More from Investing

The Markets Also Rise Quickly

James "Rev Shark" DePorre
Mar 1, 2021 4:22 PM EST

Fear of missing out permeated the day as the indexes bounced back.

NantKwest's Charts Are Extended When Compared to the Popular Moving Averages

Bruce Kamich
Mar 1, 2021 3:15 PM EST

Let's stand aside for now and see how things unfold.

Wendy's Charts Just Made Me Lose My Appetite for Investing

Bruce Kamich
Mar 1, 2021 2:21 PM EST

Here's why diving in now might lead to heartburn....

The Battle Over Cannabis Operator Verano Holdings' Stock

Debra Borchardt
Mar 1, 2021 2:00 PM EST

Sol Global and MMCap are fighting in court over who owns or owes what of the company's shares.

Is Chevron Finally Ready to Make an Upside Breakout?

Bruce Kamich
Mar 1, 2021 1:44 PM EST

Let's check out some charts on the energy giant.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 06:05 PM EST PAUL PRICE

    Michael's (MIK) up on take-over rumors

    The NYT says talks are underway regarding a buyo...
  • 08:09 AM EST GARY BERMAN

    Monday Morning Fibocall for 3/1/2021

    Always a good idea to know where our bounce zones ...
  • 11:51 AM EST REAL MONEY

    Watch Bob Lang and Doug Kass Discuss Short-Selling!

    Bob Lang and Doug Kass with an engaging and educat...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login