Oaktree Capital Management revealed its portfolio for the fourth quarter of 2022 earlier this month.
The alternative asset management firm headquartered in Los Angeles, which was founded by renowned guru Howard Marks (Trades, Portfolio) and several fellow investors in 1995, focuses on delivering superior results while observing its six-tenet investment philosophy of risk control, consistency, market inefficiency, specialization, bottom-up analysis and disavowal of market timing. Specializing in credit strategies, the firm also invests in high-yield bonds, convertible securities, distressed debt, real estate, control investments and listed equities.
Keeping these criteria in mind, 13F filings show the firm entered 18 new positions during the three months ended Dec. 31, sold out of nearly 50 stocks and added to or trimmed a number of other existing holdings. The most notable trades included reductions of its stakes in PG&E Corp. (PCG, Financial), Chesapeake Energy Corp. (CHK, Financial), Weatherford International PLC (WFRD, Financial), Hertz Global Holdings Inc. (HTZ, Financial) and Civitas Resources Inc. (CIVI, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
PG&E
The firm curbed its PG&E (PCG, Financial) stake by 68.69%, selling 17 million shares. The transaction had an impact of -2.60% on the equity portfolio. The stock traded for an average price of $15.12 per share during the quarter.
Oaktree now holds 7.75 million shares in total, occupying 1.49% of the equity portfolio. GuruFocus estimates it has gained 11.65% on the investment so far. It was previously the firm’s sixth-largest position.
The San Francisco-based utility company has a $32.94 billion market cap; its shares were trading around $15.52 on Tuesday with a price-earnings ratio of 18.48, a price-book ratio of 1.48 and a price-sales ratio of 1.50.
The GF Value Line suggests the stock is significantly overvalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 53 out of 100, the GF Score indicates the company has poor future performance potential. While it received middling marks for profitability and momentum, the growth, financial strength and GF Value ranks were low.
Of the gurus invested in PG&E, Daniel Loeb (Trades, Portfolio) has the largest stake with 2.78% of its outstanding shares. Steven Cohen (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio) and Steven Romick (Trades, Portfolio) also have notable holdings.
Chesapeake Energy
Oaktree slimmed down its position in Chesapeake Energy (CHK, Financial) by 11.94%, dumping 1.17 million shares. The transaction impacted the equity portfolio by -1.35%. Shares traded for an average price of $99.07 each during the quarter.
The firm now holds 8.63 million shares, which represent 9.65% of the equity portfolio and is its second-largest holding. GuruFocus data shows it has gained 85.32% on the investment.
The oil and gas producer, which is headquartered in Oklahoma City, has a market cap of $10.53 billion; its shares were trading around $78.36 on Tuesday with a price-earnings ratio of 4.09, a price-book ratio of 1.50 and a price-sales ratio of 1.54.
Since completing its restructuring and emerging from Chapter 11 bankruptcy in February of 2021, the stock has gained 74.11%.
Although the company appears to have weak performance potential based on its GF Score of 25, its full potential may not be accurately reflected due to only receiving ratings for profitability and financial strength.
With a 6.44% stake, Marks’ firm remains the largest guru shareholder of Chesapeake Energy. Other gurus who own the stock include Jim Simons (Trades, Portfolio)’ Renaissance Technologies, David Tepper (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and Charles Brandes (Trades, Portfolio).
Weatherford International
The Weatherford International (WFRD, Financial) holding was trimmed by 38.29%, or 2.20 million shares. The transaction impacted the equity portfolio by -0.87%. During the quarter, the stock traded for an average per-share price of $41.21.
The firm now holds 3.55 million shares, which make up 2.15% of the equity portfolio. It is now Oaktree’s ninth-largest holding. GuruFocus found the firm has gained 212.54% on the investment since establishing it in the third quarter of 2021.
The Houston-based oilfield services company has a $4.41 billion market cap; its shares were trading around $62.19 on Tuesday with a price-earnings ratio of 194.33, a price-book ratio of 8.25 and a price-sales ratio of 1.02.
According to the GF Value Line, the stock is significantly overvalued currently.
With a GF Score of 50, the company has weak future performance potential on the back of a high growth rating, moderate profitability and financial strength ranks and a low GF Value. Due to there not being a momentum rank, however, the full potential of Weatherford may not be accurately reflected.
Yacktman Asset Management (Trades, Portfolio) is Weatherford’s largest guru shareholder with a 6.97% stake. David Einhorn (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Cohen also have positions in the stock.
Hertz Global Holdings
Marks’ firm reduced its stake in Hertz Global Holdings (HTZ, Financial) by 37.91%, selling 3.97 million shares. The transaction had an impact of -0.79% on the equity portfolio. The stock traded for an average price of $16.84 per share during the quarter.
It now holds a total of 6.50 million shares, accounting for 1.19% of the equity portfolio. According to GuruFocus, the firm has lost approximately 26.41% on the investment to date.
Headquartered in Estero, Florida, the car rental company has a market cap of $6.11 billion; its shares were trading around $18.95 on Tuesday with a price-earnings ratio of 5.79, a price-book ratio of 1.61 and a price-sales ratio of 0.49.
After emerging from bankruptcy in July of 2021, the stock has fallen nearly 30%.
Further, the GF Score of 28 indicates the company has poor future performance potential. However, due to only receiving ratings for profitability, growth and financial strength, its full potential may not have been taken into account.
Despite the reduction, Oaktree is still Hertz’s largest guru shareholder with a 2.02% stake. Daniel Loeb (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Simons’ firm, Cohen and Jefferies Group (Trades, Portfolio) also own the stock.
Civitas Resources
With an impact of -0.73% on the equity portfolio, Oaktree slashed its holding of Civitas Resources (CIVI, Financial) by 90%, selling 1.03 million shares. During the quarter, shares traded for an average price of $64.46 each.
The firm now holds 115,000 shares, giving it 0.08% space in the equity portfolio. GuruFocus says it has gained 18.81% on the investment so far.
The Denver-based oil and gas producer, which was formed by the merger of Bonanza Creek Energy Inc. and Extraction Oil & Gas Inc. in November of 2021, has a $5.27 billion market cap; its shares were trading around $61.92 on Tuesday with a price-earnings ratio of 4.50, a price-book ratio of 1 and a price-sales ratio of 1.52.
Based on the GF Value Line, the stock appears to be, while undervalued, a possible value trap. As such, potential investors should do careful research before making a decision.
The company has poor future performance potential according to its GF Score of 69. While the momentum, GF Value and financial strength ranks are high, the profitability rating is more moderate. It does not have a growth rank.
Donald Smith & Co. is Civitas’ largest guru shareholder with a 2.21% stake. Other top guru investors include Diamond Hill Capital (Trades, Portfolio), Einhorn, Hotchkis & Wiley, Jefferies and Cohen.
Additional trades and portfolio composition
During the quarter, the firm also exchanged its Class C shares of Liberty Global PLC (LBTYK, Financial) for Class A shares (LBTYA, Financial), sold out of Mr. Cooper Group Inc. (COOP, Financial), added to the Petroleo Brasileiro SA Petrobas (PBR, Financial) holding and entered a new position in EF Hutton Acquisition Corp. (EFHT, Financial).
Oaktree's $8.44 billion equity portfolio, which is composed of 227 stocks, is heavily invested in the energy sector, followed by a slightly smaller position in the financial services space.
