In this article, we will take a look at the 10 Best Stocks to Buy According to Howard Marks’ Oaktree Capital Management.
Howard Marks is an American billionaire and the co-chairman and founder of Oaktree Capital, a hedge fund located in Los Angeles, California, USA. Marks is one of the world’s richest individuals, thanks to his hedge fund, which manages approximately $200 billion. The renowned investor, who graduated from the University of Pennsylvania and obtained an MBA from the University of Chicago, has a personal wealth estimated to be worth about $2.2 billion.
In a January memo titled “On Bubble Watch,” the famed investor pondered on one of his most prophetic calls: a 25-year-old article warning against the irrational behavior in dot-com companies. In his memo, Marks cited cautionary signs in today’s markets, including above-average stock valuations, an overwhelming acceptance around AI, the dominance of the Magnificent 7, and the possibility that “automated” buying of large-cap stocks has kicked in “without regard for their intrinsic value.”
Furthermore, the Oaktree CEO identified a critical aspect of stock market bubbles: the tendency of investors to rush in and buy stocks at excessively high prices. This phenomenon was evident during the dot-com boom when internet companies were frequently launched with inflated valuations and rose even higher on their first trading day. Currently, this trend is not happening. He also pointed out that innovations can leave investors without historical benchmarks to inform their growth expectations, making it easier for stock prices to soar under the belief that “this time is different.”
Moreover, in an interview with the Economic Times, the billionaire investor gave his thoughts on equity markets, stating that returns from credit seem to be more dependable.
“From the S&P, you’re not going to get the historic return of 10% a year for the next decade. You will get something less and if that’s true, then the returns described from credit are quite competitive and dependable.”
He pointed out that, while the current Fed funds rate is 4.5%, the historical average over the last 70 years has been roughly 4.9%. Marks contends that the protracted low-interest environment from 2009 to 2021 rendered credit investments unappealing. However, when interest rates rise, fixed-income assets provide enticing returns. Marks also cited Goldman Sachs’ recent projection that the S&P 500 will return only 3% annually over the next decade, as well as data from JP Morgan, which shows that when the S&P 500 is purchased at a P/E ratio similar to what it is now, historical returns over the following decade have ranged between 2% and -2% annually.
Howard Marks of Oaktree Capital Management
Our Methodology
For our list of the 12 best stocks to buy according to Howard Marks, we looked through the billionaire’s Q4 2024 stock portfolio and ranked the following equities based on his hedge fund’s stake value in each holding. Additionally, we have mentioned the hedge fund sentiment around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Indivior PLC (NASDAQ:INDV)
Oaktree Capital Management’s Q4 Stake: $112 million
Number of Hedge Fund Holders: 35
Indivior PLC (NASDAQ:INDV) develops, manufactures, and sells buprenorphine-based prescription medications for the treatment of opioid dependency and co-occurring disorders in the United States, the United Kingdom, and worldwide.
On January 28, Rodman & Renshaw commenced coverage of Indivior PLC (NASDAQ:INDV) with a Buy rating and a $16 price target. The firm’s analysts regard Indivior as a major participant in the addiction drug industry, particularly with its next-generation opioid use disorder therapy, Sublocade, which they believe has the potential to increase the company’s revenue dramatically. The firm believes that the market for long-acting opioid use disorder therapies is still in its early stages of development. This might be beneficial for Indivior’s flagship medicine.
Indivior PLC (NASDAQ:INDV) announced $0.32 earnings per share in the fourth quarter of 2024, above analysts’ expectations of $0.26. Indivior surpassed revenue projections as well, with $298 million in net revenue, crossing predictions of $261.33 million.
9. Runway Growth Finance Corp. (NASDAQ:RWAY)
Oaktree Capital Management’s Q4 Stake: $118.1 million
Number of Hedge Fund Holders: N/A
Runway Growth Finance Corp. (NASDAQ:RWAY) is an American specialty finance company offering growth financing to companies in the technology and health sciences industries, notably late-stage startups and rising growth enterprises.
On March 24, Lucid Capital Markets analyst Erik Zwick raised Runway Growth Finance Corp.’s (NASDAQ:RWAY) stock rating from Neutral to Buy, with a new price target of $12. Zwick stated that when the firm began coverage of RWAY in November 2024, its Neutral rating was influenced by three main issues: elevated nonaccruals, asset sensitivity and the prospect of additional federal funds rate cuts, and the overhang of a large shareholder selling shares on a regular basis. With two of these concerns no longer posing a danger and the possibility of resolving the third, the firm’s outlook on RWAY’s shares has improved.
Runway Growth Finance Corp.’s (NASDAQ:RWAY) fourth-quarter 2024 earnings fell short of both earnings per share and revenue expectations. The company reported an EPS of $0.39, below the projection of $0.42, and revenues of $33.8 million, which failed to meet the projected $36.1 million. In spite of these missed targets, the company reported a 5% gain in the fair value of its investment portfolio year-over-year. Furthermore, Runway Growth Finance’s net assets increased by 3% over the previous quarter, showing a solid financial position.