Oaktree, where investing great Howard Marks (Trades, Portfolio) is co-chairman, disclosed this week owning a controlling stake in a company worth almost a third of its long portfolio and bought eight other stocks in the third quarter.
Oaktree is a Los Angeles-based global alternative investment manager that specializes in credit strategies and as of Sept. 30, oversees $100 billion. Core tenets of the firm’s investment philosophy include risk aversion, market inefficiency and bottom-up analysis without market timing.
When Oaktree reported its third-quarter long Oaktree Capital Management LP portfolio, it surfaced an investment it held for several years. The 55.97% stake in the company, AdvancePierre Foods Holdings Inc. (APFH, Financial), represents 27.3% of the portfolio, making it the largest holding.
AdvancePierre turned up because it went public in July. IPO documents show that Oaktree held 79.86% of its shares prior to the offering, which was slated to decline to 57.18% at its completion. Previously, Oaktree had a management, advisory and consulting relationship with AdvancePierre since 2010. According to the agreement, AdvancePierre paid Oaktree a $3 million annual advisory fee and a $9 million one-time success fee when it terminated at the IPO. Oaktree also provided the company lien loans in the past.
Advance Pierre formed in the same year it forged the management agreement with Oaktree, 2010, through the merger of two frozen food companies and has made several large acquisitions since. The company priced its IPO at $21 per share and reaped $218.92 million in net proceeds, which it used to pay down a $1.05 billion lien loan that matures in 2023. Oaktree held $41.82 million of the loan. As of Oct. 1, AdvancePierre owed $1.04 billion in debt, down from $1.20 billion on Jan. 2.
Shares of AdvancePIerre have gained 10.54% since their IPO to close at $26.53 Thursday.
Oaktree also bought shares of companies in the third quarter. The largest new positions he started were: Alibaba Group Holding Ltd. (BABA, Financial), Fomento Economico Mexicano SAB de CV (FMX, Financial), Kinder Morgan Inc. (KMI, Financial) and Verso Corp. (VRS, Financial).
Alibaba Group Holding Ltd. (BABA, Financial)
Oaktree bought 560,148 shares of Alibaba Group Holding, a 1.34% portfolio weight. Its third-quarter share price averaged $93.
Alibaba Group Holding has a market cap of $235 billion; its shares closed Thursday at $94.00 with a P/E ratio of 47.46 and P/S ratio of 12.56. Alibaba Group Holding had an annual average earnings growth of 89.7% over the past 10 years. GuruFocus rated Alibaba Group Holding the business predictability rank of 3-star.
Fomento Economico Mexicano SAB de CV (FMX, Financial)
Oaktree bought 250,143 shares of Fomento Economico Mexicano, a 0.52% portfolio weight. Its share price averaged $92.
Fomento Economico Mexicano has a market cap of $28.48 billion; its shares closed Thursday at $79.60 with a P/E ratio of 31.55 and P/S ratio of 1.60. The trailing 12-month dividend yield of Fomento Economico Mexicano stocks is 1.68%. The forward dividend yield of Fomento Economico Mexicano stocks is 1.64%. Fomento Economico Mexicano had an annual average earnings growth of 3.5% over the past five years.
Kinder Morgan Inc. (KMI, Financial)
Oaktree bought 908,699 shares of Kinder Morgan, a 0.48% portfolio weight. Its share price averaged $21.
Kinder Morgan has a market cap of $47.75 billion; its shares closed Thursday around $21.39 with and P/S ratio of 3.57. The trailing 12-month dividend yield of Kinder Morgan Inc stocks is 2.35%. The forward dividend yield of Kinder Morgan stocks is 2.35%.
Oaktree bought 3,103,397 shares of Verso Corp., a 0.45% weight. Its share price averaged $8.
Verso has a market cap of $185.360 million; its shares were traded around $5.39 with and P/S ratio of 0.16.
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