Oaktree: Sum-Of-The-Parts And Secular Tailwinds Point To Undervalued Units
- Oaktree is a premier asset manager that is trading at a substantial discount to its intrinsic value which we think is due to hidden assets, complex corporate structure and accounting.
- The company trades at multiples that are less than traditional asset managers despite having 73% of assets locked for 10 or 11 years and an incentive fee.
- There are significant assets on the balance sheet including a 20% ownership in DoubleLine Capital, a large bucket of corporate assets, and nearly $3 per share in cash.
- Oaktree's earnings came out as slightly questionable for Q3.
- AUM growth and opportunity still prevail as the favorable factors.
- This company shows strong long-term upside by preparing to capitalize on interest rate hikes.
Oaktree Bets Against The U.S. Economy; Investors Might Bet Against Oaktree
- Oaktree is currently seeking $10 billion for its Opportunities Fund X, wagering the economy will slow down, in turn allowing them to purchase debt at a less expensive price.
- Oaktree's bets against the U.S. markets are risky, as the U.S. Federal Reserve continues to hold interest rates at a near zero level.
- The firm's stock is down 14 percent YTD, and recent earnings results show a 40% decrease in adjusted net income and a 55 percent drop in second-quarter earnings.
- While other factors, including Oaktree's historical results and dividend yield, are promising, we recommend investors take caution with the stock moving ahead in 2014.
Oaktree's Stumble Has Created A Great Entry Point For Investors
- Oaktree is a diamond in the rough when it comes to asset management firms, and it has shown its talent in investing in debt.
- Oaktree has a clear plan for the future because of its area and it can find opportunities where most companies, especially financials, will struggle.
- Although the dividend yield was temporarily cut to 4%, past performance has shown Oaktree can sustain an 8% yield with price growth.
Recent IPO Yields Over 8% And Is Hitting On All Cylinders
Wed, Jan. 14, 10:07 AM
- Medley Management (MDLY -7.9%) has struggled since its September IPO, and falls further today as KBW pulls its Outperform rating and cuts the price target to $16 from $19.50.
- While we're on alternative asset managers, KBW at the same time upgrades Oaktree Capital (OAK +0.7%) to Outperform. The trouble in the energy patch should be manna to the distressed asset studs at Oaktree.
Tue, Jan. 6, 2:38 PM
- One of today's worst-performing sectors as oil tumbles below $48 per barrel is private-equity. It was late last year Blackstone's Steven Schwarzman told investors he was itching to buy into the dive in energy, a promise he made good on in the first session of this year. In general one would think the plunge is a good thing for the opportunistic types who manage these companies.
- In late December, it was estimated buyout firms had lost a combined $11.7B in 27 publicly traded oil producers since June, and that was with oil nearly $10 higher than it is today.
- ETFs: PSP, PEX
- Other individual names: KKR (KKR -2.1%), Fortress Investment (FIG -2.7%), Apollo Global (APO -3.5%), Oaktree (OAK -3.9%), The Carlyle Group (CG -2.8%), Ares Management (ARES -1.8%).
Dec. 15, 2014, 10:56 AM
Dec. 9, 2014, 3:23 PM
- "Virtuous cycles don’t go on forever," said Oaktree Capital (OAK +0.4%) CEO Howard Marks on a recent earnings call.
- Oaktree has been in the investor penalty box for much of the year as the rally in pretty much everything is not the kind of environment in which Marks' shop can stand out above the rest. The energy rout, however, has made it possible for the company to put some of its dry powder to work.
- "We have been investing," says Marks, reports Bloomberg.
Dec. 4, 2014, 10:19 AM
- In private-equity, Blackstone (BX +1.4%) and KKR & Co. (KKR +0.9%) post gains after being initiated with Overweight ratings, while Carlyle Group (CG -1%) and Oaktree Capital (OAK -0.5%) are started at Equal Weight.
- Moving onto traditional asset managers, Invesco (IVZ -0.5%) is rated Overweight, while T. Rowe Price (TROW -0.3%), Legg Mason (LM -1.5%), Franklin Resources (BEN -0.9%), and BlackRock (BLK -0.2%) are all started at Equal Weight.
Dec. 2, 2014, 3:22 PM
- Looking to maybe call a bottom for the struggling common stock of Oaktree Capital (OAK +4.9%), Barron's David Englander says Howard Marks' shop is positioned just right to profit (again) as the credit cycle turns.
- Markets "appear to be in a virtuous cycle in which the defaults are unlikely to rise in the foreseeable future," said Howard Marks on the recent earnings call. "But virtuous cycles don’t go on forever. Sooner or later, defaults will rise and markets will fall.” It's when they do, says Englander, that Oaktree will find itself in high cotton. The company has $93B in AUM, and plans on raising another $20B to add to an existing $13B in "dry powder."
Nov. 18, 2014, 9:49 AM
- The triple-net REIT formed by Oaktree Capital (NYSE:OAK), STORE Capital (NYSE:STOR) priced its IPO at $18.50 vs. the expected range of $17-$19. The 27.5M share offering thus raised $509M in gross proceeds.
- Related: IPO Preview: STORE Capital Corporation
- Related: Why Will This New Net Lease REIT Be A Game Changer?
Oct. 30, 2014, 12:19 PM
- Speaking on the earnings call, Oaktree Capital (OAK -1.7%) management confirms it's raising $10B for a distressed fund with plans to sit on most of it ($7B) until a sizable market reversal makes for tastier opportunities.
- Oaktree's John Frank three months ago: “Aggressive extensions of credit of the sort we’re seeing today have always been a precursor to a substantial distressed-debt opportunity.”
- As for now, markets are in a virtuous cycle, says Howard Marks, and default rates should remain low going forward. On the hiring of AIG's Jay Wintrob as CEO, the move isn't necessarily "insurance-oriented," says Marks.
- Previously: Oaktree Capital Group misses by $0.11, misses on revenue
Oct. 30, 2014, 9:15 AM| Comment!
Oct. 27, 2014, 2:54 PM
- Oaktree Capital (OAK +0.7%) agrees to purchase Hess' (HES -2.1%) 50% share of energy trader HETCO for an undisclosed amount, and says it will inject $500M to fund expansion into new commodity markets.
- HES launched the sale of Hess Energy Trading more than a year and a half ago after investors urged the company to divest the unit, saying it weighed on the company's balance sheet.
- HES has been shedding assets since 2013, when activist shareholders including Elliott Management forced a reorganization of the board.
Oct. 19, 2014, 9:57 AM
Oct. 17, 2014, 10:29 AM
- Signature Group (OTCQX:SGGH +24.2%) agrees to acquire the recycling business of aluminum fabricating company Aleris Corp. for $525M in cash and stock.
- The unit is the world's largest independent recycler of aluminum, Signature says, adding that it believes the use of remelted aluminum will outpace consumption of primary aluminum for the next decade
- Aleris is owned by Oaktree Capital Management (OAK +0.9%).
Oct. 6, 2014, 10:13 AM
- Jay Wintrob - who recently departed AIG after being passed over for the top spot there - will join Oaktree Capital (OAK +0.6%) in the newly-created role of CEO, effective November 1. Wintrob has been on the Oaktree board since 2011.
- "It's time for us to turn to a world-class financial services executive to take our business to the next level," Oaktree Chairman and co-founder Howard Marks. Bruce Karsh - also a co-founder and currently president of Oaktree - will join Marks as co-Chairman. He'll continue in the role of CIO and portfolio manager of the Distressed Opportunities and Value Opportunities strategies.
- Source: Press Release
Sep. 4, 2014, 11:36 AM
- "What I do know is that [current] conditions are creating a degree of risk for which there is no commensurate risk premium," writes Oaktree (OAK +0.6%) chief Howard Marks in his latest memo. "Although I have no idea what could make the day of reckoning come sooner rather than later, I don't think it's too early to take today's carefree market conditions into consideration."
- While Marks says investor behavior hasn't quite sunk to the lows seen just ahead of the financial crisis, it's starting to get close. Reiterating his recent mantra of "move forward, but with caution," Marks today would boost the emphasis on the last three words.
Aug. 12, 2014, 11:32 AM
Jul. 31, 2014, 9:29 AM
- Distributable earnings per Class A unit of $0.64 vs. $1.94 a year ago thanks to lower incentive income. Economic net income of $1.17 per unit vs. $1.13 one year ago.
- Fee-generating AUM of $77.8B up 20% from a year ago, thanks to inflows and market-value gains. Gross capital raised in Q2 of $5.3B.
- Uncalled capital commitments of $11B flat from last year.
- Conference call at 11 ET
- Previously: Oaktree Capital Group beats by $0.08, misses on revenue
- OAK flat premarket
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