Oaktree Capital Management revealed its portfolio for the fourth quarter of 2021 earlier this week.
The alternative asset management firm headquartered in Los Angeles, which was founded by renowned guru Howard Marks (Trades, Portfolio) and several fellow investors in 1995, focuses on delivering superior results while observing its six-tenet investment philosophy of risk control, consistency, market inefficiency, specialization, bottom-up analysis and disavowal of market timing. Specializing in credit strategies, the firm also invests in high-yield bonds, convertible securities, distressed debt, real estate, control investments and listed equities.
Keeping these criteria in mind, the firm entered 133 new positions during the three months ended Dec. 31, sold out of nearly 50 stocks and added to or reduced a number of other existing holdings. Its most notable trades included new positions in Garrett Motion Inc. (GTXAP.PFD, Financial), Runway Growth Finance Corp. (RWAY, Financial), CBL & Associates Properties Inc. (CBL, Financial), Civitas Resources Inc. (CIVI, Financial) and Cvent Holding Corp. (CVT, Financial).
Garrett Motion
The firm invested in 68.8 million preferred shares of Garrett Motion (GTXAP.PFD, Financial), allocating 7.45% of the equity portfolio to the stake. The preferred stock traded for an average price of $8.13 per share during the quarter.
It is now Oaktree’s fourth-largest holding.
The Swiss company, which manufactures turbochargers and electric-boosting technologies for original equipment manufacturers and aftermarket auto parts retailers, has a $456.82 million market cap; its common shares (GTX, Financial) were trading around $7.15 on Friday with a forward price-earnings ratio of 6.03 and a price-sales ratio of 0.11.
The GF Value Line shows the stock is a possible value trap currently based on historical ratios, past performance and future earnings projections. As a result, potential investors should conduct thorough research before making a decision.
GuruFocus rated Garrett Motion’s financial strength 4 out of 10. Despite having sufficient interest coverage, the Altman Z-Score of 1.27 warns the company could be at risk of going bankrupt. The Sloan ratio also indicates it has poor earnings quality. The return on invested capital, however, overshadows the weighted average cost of capital, so value is being created as the company grows.
The company’s profitability fared a bit better with a 6 out of 10 rating. Although the margins are in decline, Garrett Motion is supported by strong returns on equity, assets and capital that top a majority of competitors. It also has a moderate Piotroski F-Score of 5 out of 9, meaning conditions are typical for a stable company.
In addition to Marks’ firm, Seth Klarman (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Prem Watsa (Trades, Portfolio) own Garrett Motion’s preferred stock.
Runway Growth Finance
Oaktree picked up 19.9 million shares of Runway Growth Finance (RWAY, Financial), dedicating 3.31% of the equity portfolio to the stake. Shares traded for an average price of $12.99 each during the quarter.
It is now the firm’s eighth-largest holding.
Headquartered in Chicago, the specialty finance company, which focuses on providing senior secured loans to companies with high growth potential, has a market cap of $555.33 million; its shares were trading around $13.32 on Friday with a price-earnings ratio of 14.58, a price-book ratio of 1.09 and a price-sales ratio of 12.96.
Since its initial public offering in October, the stock has gained around 3.26%.
Runway’s financial strength was rated 3 out of 10 by GuruFocus, while its profitability scored a 2 out of 10 rating.
Of the gurus invested in Runway Growth Finance, Marks’ firm has the largest stake with 48.28% of its outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Paul Tudor Jones (Trades, Portfolio) also have positions in the stock.
CBL & Associates Properties
Marks’ firm entered a 2.16 million-share stake in CBL & Associates Properties (CBL, Financial), giving it 0.87% space in the equity portfolio. During the quarter, the stock traded for an average per-share price of $30.23.
The Chattanooga, Tennessee-based real estate investment trust, which invests in shopping centers primarily in the Southeastern and Midwestern U.S., has an $876.72 million market cap; its shares were trading around $27.67 on Friday with a price-book ratio of 1.22 and a price-sales ratio of 3.69.
The stock, which began trading at the beginning of November following its emergence from bankruptcy, has fallen 10% so far.
GuruFocus rated CBL & Associates’ financial strength 2 out of 10 on the back of weak interest coverage and low debt-related ratios.
The REIT’s profitability fared even worse with a 1 out of 10 rating. It is being weighed down by margins and returns that underperform a majority of industry peers.
So far, Oaktree is the only firm invested in the stock with 6.84% of its outstanding shares.
Civitas Resources
Oaktree Capital gained 1.32 million shares of Civitas Resources (CIVI, Financial), impacting the equity portfolio by 0.84%. During the quarter, the stock traded for an average price of $53.17 per share.
The oil and gas producer headquartered in Denver, which was formed by the merger of Bonanza Creek Energy Inc. and Extraction Oil & Gas Inc. in November, has a market cap of $3.95 billion; its shares were trading around $47.26 on Friday with a price-earnings ratio of 13.98, a price-book ratio of 1.02 and a price-sales ratio of 2.66.
The firm previously held a position in Extraction Oil & Gas, which was dissolved following the close of the all-stock deal.
According to the GF Value Line, the stock is currently modestly undervalued.
Civitas Resources’ financial strength was rated 6 out of 10 by GuruFocus. In addition to adequate interest coverage, the Altman Z-Score of 5.08 indicates the company is in good standing. The ROIC also eclipses the WACC, meaning value creation is occurring.
The company’s profitability did not fare as well, scoring a 4 out of 10 rating even though it is supported by strong margins and returns that outperform a majority of competitors. Civitas also has a moderate Piotroski F-Score of 6.
With a 2.04% stake, Donald Smith & Co. is Civitas’ largest guru shareholder. Other top guru investors are Azvalor Internacional FI (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Hotchkis & Wiley, David Einhorn (Trades, Portfolio), Azvalor Blue Chips FI (Trades, Portfolio), Scott Black (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and Azvalor Managers FI (Trades, Portfolio).
Cvent Holding
The firm established a 5 million-share stake in Cvent Holding (CVT, Financial), expanding the equity portfolio by 0.53%. Shares traded for an average price of $8.15 each during the quarter.
The Tysons, Virginia-based software company, which specializes in meetings, events and hospitality management technology, has a $3.13 billion market cap; its shares were trading around $6.50 on Friday with a forward price-earnings ratio of 41.23, a price-book ratio of 2.84 and a price-sales ratio of 8.52.
Based on the price chart, the stock appears to have tumbled over 30% since its IPO in December.
GuruFocus rated Cvent’s financial strength 4 out of 10 as the Altman Z-Score of 1.23 warns it could be in danger of going bankrupt.
The company’s profitability scored a 1 out of 10 rating, weighed down by negative margins and returns that underperform a majority of industry peers. Revenue per share has also declined over the past 12 months.
Marks’ firm has the largest stake in Cvent with 1.04% of its outstanding shares. Louis Moore Bacon (Trades, Portfolio) is also a shareholder.
Additional trades and portfolio composition
During the quarter, the firm also established a position in Credicorp Ltd. (BAP, Financial), curbed its holdings of Bank Bradesco SA (BBD, Financial) and Super Micro Computer Inc. (SMCI, Financial) and exited its Columbia Property Trust Inc. (CXP, Financial) stake.
Oaktree's $7.74 billion equity portfolio, which is composed of 253 stocks, is heavily invested in the energy sector, followed by a slightly smaller position in the financial services space.
