I am always amazed how most IPOs slide off most investors' radars quickly after their debuts. Ironically, months after a company goes public, it sometimes turns out to be the best time to invest in these shares. Oaktree Capital (OAK) went public in April and even though it had a stellar first earnings report, the shares are still down some 10% from their debut and the equity yields over 8% to boot.
Positive catalysts in August for Oaktree:
- It reported earnings earlier in the month of 89 cents a share, easily surpassing estimates of 61 cents a share.
- Revenues also rose over 13% Y/Y to some $341mm, beating estimates by $75mm.
- The company raised its declared dividend to 79 cents a share from the prior quarter's 55 cents a share
- An insider made a $100k plus purchase a few days after the earnings announcement.
Oaktree Capital Group operates as a global investment management firm that focuses on alternative markets. It manages investments in a number of strategies within six asset classes, including distressed debt; corporate debt, including high yield debt and senior loans; control investing; convertible securities; real estate; and listed equities.
Four reasons OAK is a solid value pick for income investors at $38 a share:
- The company provides a robust 8.3% yield (based on annualizing its last quarterly payout) at its current stock price. Based on earnings projections, this yield should move considerably higher over the next year as well.
- Earnings are solid and growing. The company should make $3.14 a share in FY2012 and analysts project an impressive $4.50 in EPS for FY2013.
- The median price target on OAK by the five analysts that cover the shares is $48. Price targets range from $42 to $55 a share.
- In addition to crushing estimates in its first earnings report as a public entity, consensus earnings estimates for both FY2012 and FY2013 have risen significantly over the past month.