Well known for his Oaktree memos, Howard Marks is a very successful value investor who manages over $5 billion of investments at Oaktree Capital. Recently, Marks has been fearful of the uncertain ground capital markets are on due to quantitative easing and other monetary policies that have been propping up the stock market. Having expressed this fear through his letters, it is only fitting that the last quarter of 2012 found his fund selling shares from some of his most largest holdings like Charter Communications (CHTR), Delphi Automotive (DLPH), Cemex (CX) and CIT Group (CIT). So, having sold from four of his top six holdings, let's take a look at his top five most recent purchases.
Marks' biggest purchase in the fourth quarter of 2012 was in shares of Dynegy Inc. (DYN), a $2 billion utility company that came out of bankruptcy in October of 2012. Dynegy is a long-time favorite of Kyle Bass and has recently seen some insider activities. Per Yahoo Finance, 25,750 shares have been purchased in the last six months. Trading has been relatively flat since October, so it can be assumed that anyone who purchases this stock, at its current price of $19.58, is picking it up at close to the same price that Marks did. As of December, Dynegy was Oaktree's 7th-largest holding and accounted for approximately 2.54% of the portfolio.
Oaktree's second-largest purchase was in Nuance Communications (NUAN). This position represents 1.24% of last year's portfolio. Nuance is a $6.1 billion communications company that offers, per Morningstar, voice and language solutions for businesses and consumers around the world. It has a much healthier balance sheet than Dynegy and currently has a P/B of 2.2 and P/S of 3.5. For anyone interested, shares trade at $19.22 per share, which is lower than when Marks' would have made his purchase.
Having long been associated with the investment style of Buffett, it is only fitting that the two both made new investments in Verisign (VRSN) at the end of 2012. Verisign is a $7.1 billion company that trades at $46.78 per share, which is up from its December lows of $34 per share. Marks' investment in Verisign represented 0.98% of Oaktree's portfolio at the end of 2012.
Oaktree's fourth-largest new position, representing 0.91% of the portfolio, was in Stillwater Mining Co. (SWC). Stillwater, with a market cap of $1.55 billion, is a miner of platinum and palladium. Shares of Stillwater trade for $13, which is near its 52-week high and close to 75% higher than its August low of $7.47.
Coming in at 5th was Oaktree's purchase of shares in Cobalt International Energy (CIE). At the end of 2012 this position represented 0.81% of the portfolio. Shares for Cobalt trade for $25.95, which is in the middle of their 52-week range of $19.60 to $33.51. With a market cap of $10.55 billion, Cobalt is the largest company of the five new positions. Taking a close look at the financials will reveal consistent losses and sales of shares so, this purchase may indicate Oaktree thinks Cobalt has what it takes to turn around.