Howard Marks' Top 5 First Quarter Buys

Includes: CIE, INTC, MT, MTG, PCLN
by: Profit Fan

In addition to making a lot of money for Oaktree Capital investors, Howard Marks has contributed greatly to the investing community through is book, The Most Important Thing, and his insightful memos.

Below, I have presented a review of the top 5 purchases made by Oaktree Capital in the first quarter of 2013, found from its recently filed portfolio. Keeping track of Marks' portfolio is useful because he has an eye for undervalued securities and his picks can be used as a screen for new investment ideas.

The largest purchase of the first quarter resulted in a 167% increase in the funds holding of Cobalt International Energy (NYSE:CIE), from 50 million shares to 133.5 million shares. Cobalt is now the funds 6th largest holding and was worth $149.3 million at the end of March, good for 3.07% of the funds $4.911 billion portfolio. Cobalt has a market cap of $10.77 billion, pays no dividend and is one of the most volatile stocks on this list with a Beta of 2.49. CIE shares are up 7.78% YTD and trade 34.43% above their 52 week low of $19.69.

The second largest purchase increased Oaktree's holdings of Intel (NASDAQ:INTC) by 612%, from 9.725 million shares to 69.225 million. Intel, at the end of the first quarter, was the portfolio's 11th largest holding and worth $78.4 million (1.61% of the portfolio). Intel has a dividend yield of 3.7% and trades with a forward P/E of 11.84. Shares of Intel are up 18.37% YTD and trade 10.35% below their 52 week high of $26.69, at $23.92 per share.

The third largest purchase in Q1FY13 resulted in a new position in (NASDAQ:PCLN), worth $59.9 million. Priceline has performed really well in 2013 and is up 29.13% YTD, much of which is a result of an upward move in May, after the company purchased the shares. Priceline trades for $801.12 per share, has a market cap of $40.1 billion and carries the highest P/B ratio of all the companies on this list, at 10.08.

The fourth largest purchase was a 628% increase in the shares held in MGIC Investment Corp. (NYSE:MTG), worth $61.6 million at the end of March. MGIC is a mortgage insurer that has benefited largely from the housing recovery, shares are up 126.69% YTD and trade 813.64% above their 52 week low of $0.66, at $6.03 per share. MGIC has both the smallest market cap on this list, at $2.04 billion, and has the highest volatility, with a Beta of 3.55.

Lastly, the fifth largest purchase made by Oaktree in the first quarter resulted in a new $53.8 million holding of shares in ArcelorMittal (NYSE:MT). Arcelor has a market cap of $22.45, has a dividend yield of 5.3% and is the only company on the list that trades near its 52 week lows, down 25.41% YTD. Arcelor is also the only company on this list that currently trades below book value, current P/B of 0.46.

In conclusion, this list is a good starting point for new ideas as Marks has a very successful track record. This list however is not a substitute for a more thorough analysis and research. For anyone interested in more info on famous fund holdings, you can check out my other articles for comprehensive reviews of the portfolios of Warren Buffett, Kyle Bass and Seth Klarman.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.