Most institutional investors have recently filed their Form 13-Fs with the SEC that lists their fund's holdings. In this article, we will take a quick look at interesting additions, removals, new positions, and closed positions from Oaktree Capital Management.
Oaktree Capital Management is a fund chaired by Mr. Howard Marks, one of our favorite investment managers, and a publisher of an irregular newsletter that is freely distributed for investors and is a must-read for sophisticated macro observers and investors. We believe his assessment of the current economic situation is very similar to our own, and thus we think it's prudent to track his fund's investments. The fund is fairly large, and has over $5 billion in declared assets over the most recent quarter.
But before we discuss interesting changes in fund's holdings let us briefly introduce investors to what a Form 13-F is and its investment benefits.
Introduction to the Form-13F
Form 13Fs are forms that are required by the US Securities and Exchange Commission for all institutional investment managers that exercise investment decisions over assets totaling more than $100 million. These forms must be filed no later than 45 calendar days after the end of each quarter and require the listing of equities, certain equity options and warrants, closed-end investment companies, and some convertible debt securities. You can find more details at the SEC website.
These filings are useful for investors because they give insight into the actions of the large investment management funds that manage billions of dollars worth of assets - the true "whales" of the investment world. Since they are large management firms, they have the capital to employ research teams and do much more due diligence than most individual investors can do. So by following their holdings an investor can get some good ideas on what to buy or sell, after all it is not always necessary for investors to "reinvent the wheel." These forms are a wonderful way for them to piggyback on some of the research done by large firms - though due diligence still must be done because hedge funds do often make mistakes and investors should still understand why they own their investments.
Investors should also note that 13-Fs are always a bit dated and are a "moment-in-time" report, which means these positions may be quite different today versus what they were at the end of the previous quarter. Additionally, for large positions, a fund may have already bought their desired shares and thus investors buying those same positions today may be buying a little late in the game.
After knowing the things to watch out for, Form 13-Fs can still provide investors with some excellent information on positions to own and what they should consider selling.
Top Holdings, New Positions, and Closed Positions on 9/30/13
Source: Whale Wisdom
Three Interesting Positions in the Oaktree Portfolio
Here are three interesting positions that we are noting from Oaktree's filing - two additions and one large sell.
Level 3 Communications - Level 3 Communications (LVLT) is a global communications and IT infrastructure solutions provider, and their main clients are military and government entities. What's interesting about this position is that it was one of the largest percentage increases for Oaktree's holdings, and even though it still makes up less than a 1% holding they increased their ownership by 50%. It is an interesting decision even though the company has quite high debt levels - investors interested in LVLT may want to investigate it further since Oaktree seems to have bullish thoughts on the company.
Masonite International Corporation - Masonite International Corporation (DOOR) is a company that manufactures interior and exterior doors and door-related products worldwide. Obviously, they are a new construction and home improvement play, but the interesting thing about this holding is that it was a huge addition where Oaktree decided to establish a new position and increased it to a sizable 4.5% of their portfolio and this company is their third largest stock holding - that is quite a bit of conviction! Obviously, Oaktree may be hedging this large position in some way, but the sheer size of the holding should interest investors looking for long ideas. Additionally, the stock hasn't moved too much since the holdings were declared at the end of Q3FY13, and the low liquidity compared to the position size means it is unlikely that Oaktree disposed of the position since the end of the third quarter. It seems to be a very bullish call on the company and investors looking for new positions should take a good look at DOOR.
Charter Communications - Charter Communications (CHTR) is a US cable provider with approximately 5.9 million residential and commercial customers, and they provide cable and the associated services (OnDemand, DVR, etc.). The interesting thing about Oaktree's CHTR transaction was that the company significantly cut its position by 50% (or $134 million worth) during the quarter. While, that alone shouldn't make investors sell their Charter Communications positions, it definitely is a reason to carefully reassess their CHTR position.