Oaktree Capital Management recently disclosed its 13F portfolio updates for the third quarter of 2021, which ended on Sept. 30.
Founded by Howard Marks (Trades, Portfolio) and several fellow investors in 1995, Oaktree Capital Management is a global investing firm that specializes in alternative and credit strategies. The Los Angeles-based firm now has over 39 portfolio managers and 950 employees in offices around the globe. Marks is the co-chairman and chief financial officer. The core investment philosophy of the firm has six tenets: risk control, consistency, market inefficiency, specialization, bottom-up analysis and disavowal of market timing.
Based on the firm’s 13F for the quarter, its biggest sells were Americold Realty Trust (COLD, Financial) and Shoals Technologies Group Inc. (SHLS, Financial), while its top buys were Weatherford International PLC (WFRD, Financial) and Freeport-McMoRan Inc. (FCX, Financial).
Americold Realty Trust
Oaktree ditched its 11,771,646-share stake in Americold Realty Trust (COLD, Financial). Previously, the stock took up 5.98% of the equity portfolio. Shares traded for an average price of $36.68 apiece during the three months through September.
Based in in Atlanta, Americold Realty Trust is the largest publicly traded real estate investment trust that is focused specifically on the ownership, operation, acquisition and development of temperature-controlled warehouses.
Americold has a financial strength rating of 4 out of 10; the interest coverage ratio of 1.59 and Altman Z-Score of 1.29 indicate potential liquidity issues. While revenue growth has been decent, revenue per share has tanked due to high share issuance.
At a price of $31.69 per share, the stock has a market cap of 8.43 billion. The GuruFocus Value chart rates the stock as modestly undervalued.
Shoals Technologies Group
The firm also sold out of its Shoals Technologies Group (SHLS, Financial) position, which was worth 4,977,751 shares and made up 2.37% of the equity portfolio. During the quarter, shares traded around $31.17 each.
Shoals Technologies provides electrical balance of system for solar energy projects, with offerings such as custom harness solutions, combiner boxes, junction boxes, PV wire, in-line fuses, racking and string level monitoring solutions. It has its headquarters in Portland, Tennessee.
The GuruFocus system gives Shoals a financial strength rating of 4 out of 10. Even though the cash-debt ratio is low at 0.03, the Piotroski F-Score of 8 out of 9 indicates a healthy financial situation. The profitability rating is 5 out of 9 on operating and net margins that outperform 80% of industry peers.
Shares of Shoals traded around $35.67 on Nov. 16 for a market cap of $3.75 billion. Since going public in January of 2021, the stock is up 15%.
Weatherford International (WFRD, Financial) was Oaktree’s top buy of the quarter. The firm picked up 6,264,319 shares, giving the stock a 2.01% portfolio weight at the average price for the quarter of $16.65.
Weatherford International is an American-Irish oilfield services company, one of the largest of its kind. The wellbore and production solutions specialist helps customers worldwide with constructing, finishing and maintaining oil wells.
The company’s financial strength is rated 3 out of 10, with an interest coverage ratio of 0.17 and an Altman Z-Score of 0.54 showing the company may need to raise additional liquidity to avoid bankruptcy. The profitability score is 4 out of 10, with the bottom line beginning to trend up again even as the top line continues falling.
Weatherford emerged from so-called “Chapter 22” bankruptcy in June of 2021 (Chapter 22 is the moniker for when a company files for Chapter 11 twice within a year). Since then, the stock has gained 145%. The company current trades at a price of $31.44 per share with a market cap of $2.21 billion.
Oaktree also established a new 1,833,550-share investment in Freeport-McMoRan Inc. (FCX, Financial). The stock traded for an average price of $35.25 per share during the quarter, giving the holding an estimated portfolio weight of 0.97%.
Freeport-McMoRan is a copper mining company based in Phoenix. It primarily operates large, long-lived assets with reserves of copper, gold and molybdenum. It is one of the world’s biggest publicly traded copper companies.
With a solid interest coverage ratio of 10.83 and a healthy Piotroski F-Score of 7 out of 9, Freeport gets a financial strength rating of 5 out of 10. The profitability rating is 6 out of 10 on the back of improving operating and net margins that are outperforming 78% of industry peers.
With a price of $39.60 per share as of Nov. 16, which amounts to a market cap of $58.15 billion, the stock is trading near its fair value and median historical valuation based on the Peter Lynch chart.
At quarter’s end, Oaktree Capital Management held 158 common stock positions valued at a total of $5.96 billion. The turnover was 6%.
The top holding was Chesapeake Energy Corp. (CHK, Financial) with 11.97% of the equity portfolio, followed by Star Bulk Carriers (SBLK, Financial) with 10.17% and Vistra Corp. (VST, Financial) with 8.33%.
By sector weighting, the firm had the biggest portions of its portfolio allocated to energy, industrials and financial services.