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.
8. Vista Energy, S.A.B. de C.V. (NYSE:VIST)
Oaktree Capital Management’s Q4 Stake: $124.1 million
Number of Hedge Fund Holders: 18
Vista Energy S.A.B. de C.V. (NYSE:VIST), previously known as Vista Oil & Gas SA de CV, is an energy company established in Mexico. The company specializes in the identification, purchase, and development of oil and gas reserves throughout Latin America, particularly in Mexico, Argentina, Brazil, and Colombia.
On January 3, UBS analysts downgraded Vista Energy S.A.B. de C.V. (NYSE:VIST) from Buy to Neutral, but raised their price target to $64 from $60. The firm observed that the market may already have factored in Vista Oil & Gas’s expected better performance over the next two years. UBS praised the company’s solid management and operational performance, deeming it among the finest in the Latin American oil and gas industry.
Vista Energy S.A.B. de C.V. (NYSE:VIST) recently announced joining the Vaca Muerta Sur Project, a crude oil export pipeline initiative with YPF S.A., Pampa Energía S.A., and Pan American Sur S.A. The project, which is planned to begin operations in 2027, includes a 437-kilometer pipeline capable of transporting up to 550,000 barrels of crude oil per day, with the capacity to expand to 700,000 barrels. Vista Energy has acquired a minority part in the project with a total estimated investment of $3 billion.
7. AngloGold Ashanti plc (NYSE:AU)
Oaktree Capital Management’s Q4 Stake: $128.26 million
Number of Hedge Fund Holders: 31
AngloGold Ashanti plc (NYSE:AU) is a global gold mining company with operations in Africa, Australia, and the Americas. It owns and runs multiple high-quality assets, including its flagship Geita mine in Tanzania. In addition to gold, AngloGold generates silver and sulfuric acid as byproducts, which contribute to a diverse revenue stream.
AngloGold Ashanti plc (NYSE:AU) recently agreed to a majority share in Matsa Resources’ Lake Carey gold mine in Western Australia. The $70.4 million transaction adds about 949,000 ounces of gold resources and 104,000 ounces of reserves to AngloGold’s portfolio, strengthening its position in a high-potential gold area.
AngloGold Ashanti plc (NYSE:AU) announced fourth-quarter earnings and revenues that were below analyst projections. The company reported an EPS of $0.89, below the consensus forecast of $0.99, while revenues came in at $1.72 billion, a little lower than expected. Despite this, AngloGold Ashanti’s free cash flow increased significantly, reaching $942 million from $109 million the previous year. Adjusted EBITDA also rose 93% to $2.75 billion. This growth was credited the rise to operational and efficiency gains, as well as a favorable gold price.
6. SunOpta, Inc. (NASDAQ:STKL)
Oaktree Capital Management’s Q4 Stake: $159.4 million
Number of Hedge Fund Holders: 27
SunOpta, Inc. (NASDAQ:STKL) is involved in the manufacture and sale of plant and fruit-based food alongside beverage products. Under the Dream and West Life brands, the company offers plant-based drinks made from oats, almonds, hemp, and other basic ingredients.
SunOpta, Inc.’s (NASDAQ:STKL) revenue increased by 9% in Q4 2024, led by a 13% increase in volume, demonstrating wide improvements across categories, products, and customers. Its adjusted EBITDA climbed by 20%, and its adjusted EBITDA margin improved by 130 basis points to 13.4%. This was due to significant revenue growth and operational efficiency.
On March 4, DA Davidson maintained its Buy rating for SunOpta, Inc. (NASDAQ:STKL) shares, with a $9 price target. SunOpta has great potential, according to analyst Brian Holland, who highlights the stock’s appealing risk-reward profile in the food industry. He emphasizes the company’s stable success and tremendous long-term development potential, despite the recent decision to remove the plant-based surcharge from coffee shops.
5. Infinera Corporation (NASDAQ:INFN)
Oaktree Capital Management’s Q4 Stake: $165.4 million
Number of Hedge Fund Holders: 26
Infinera Corporation (NASDAQ:INFN), now a part of Nokia, is a San Jose, California-based vertically integrated provider of open optical networking solutions and advanced optical transmission equipment. It also manufactures IP transport solutions for the telecoms service provider sector.
For the fourth quarter of 2024, Infinera Corporation (NASDAQ:INFN) reported GAAP revenues of $414.4 million, down from $453.5 million in the same period of 2023. The GAAP gross margin for the quarter was 38.0%, significantly lower than 38.6% in Q4 2023. GAAP revenue for the full fiscal year 2024 was $1,418.4 million, a decrease from $1,614.1 million in 2023. That said, the company produced record revenue with webscalers, accounting for more than half of total revenue exposure (direct and indirect) in the year. The company has earned important design wins throughout the GX systems portfolio with webscalers and Tier 1 Communications Service Providers (CSPs).
4. Sitio Royalties Corp. (NYSE:STR)
Oaktree Capital Management’s Q4 Stake: $248 million
Number of Hedge Fund Holders: 29
Sitio Royalties Corp. (NYSE:STR) is an energy company that acquires, owns, and manages mineral and royalty interests in prime basins around the United States. The company’s portfolio includes mineral and royalty holdings in West Texas’ Permian Basin.
Sitio Royalties Corp.’s (NYSE:STR) Q4 earnings report revealed mixed results, with the company posting earnings per share of $0.09, which fell short of the expected $0.1217. That said, revenue spiked to $155.09 million, crossing the expected $147.5 million.
Since going public in 2022, Sitio Royalties Corp.’s (NYSE:STR) total return of capital to shareholders has topped $840 million, including cash dividends and share repurchases, with 2024 accounting for more than $330 million. Moreover, Sitio declared a cash dividend of $0.41 per share of Common Stock for the fourth quarter of 2024. The dividend will be paid on March 28, 2025 to shareholders of record at the close of business on March 14, 2025.
3. Garrett Motion Inc. (NASDAQ:GTX)
Oaktree Capital Management’s Q4 Stake: $398 million
Number of Hedge Fund Holders: 32
Garrett Motion Inc. (NASDAQ:GTX) is an auto components company that develops, produces, and distributes turbocharging, air and fluid compression, and high-speed electric motor technologies to original equipment manufacturers.
On February 12, BWS Financial analyst Hamed Khorsand maintained a Buy rating on Garrett Motion Inc. (NASDAQ:GTX) shares, with a price objective of $12 per share. The analyst remains optimistic on GTX, citing the company’s financial health and future prospects.
Garrett Motion Inc.’s (NASDAQ:GTX) fourth-quarter 2024 earnings showed a notable success, with earnings per share of $0.47 beating the expected $0.31. However, the company’s revenues of $844 million was less than the expected $905.5 million. On the other hand, the firm had an adjusted EBITDA of $153 million, indicating an 18.1% margin, up from the previous year. Looking forward, Garrett Motion forecasts net sales of $3.4 billion and net profitability of $232 million in 2025.
McIntyre Partnerships stated the following regarding Garrett Motion Inc. (NASDAQ:GTX) in its Q4 2024 investor letter:
“Garrett Motion Inc. (NASDAQ:GTX) is a leading manufacturer in the moat-rich turbocharger (TB) market, with a global end-market and industry-leading margins. As TBs are not used in battery electric vehicles (BEVs), the market has concerns about GTX’s terminal value, which is suppressing its valuation. GTX trades ~5x my 2025 levered FCF with leverage at 2x EBITDA. Beyond its core business in TBs, GTX has a separate BEV growth story that is currently pre-revenue with high upfront costs, depressing GTX’s reported run-rate FCF. As a result, I believe GTX is even cheaper on owners’ earnings than the headline numbers suggest. Beyond its BEV investments, GTX has been using its FCF to buy back significant amounts of stock. Since 2022, GTX has retired almost one-third of its shares outstanding. If either BEV penetration is less bad than feared or GTX has success in its BEV investments, I believe GTX shares are significantly undervalued.
Before I dig into numbers, I want to revisit GTX’s TB business, which I believe has a deep moat and is highly predictable. TBs are a high-tech, mission-critical component of a car’s engine. The TB market is a duopoly between BWA and GTX. While there are also smaller Asian competitors, GTX and BWA enjoy significant engineering and R&D advantages over their peers, which creates a moat and allows GTX to earn among the highest margins and lowest annual price downs of any publicly traded auto supplier. TBs are essentially mini-jet engines that take the exhaust fumes and push that air back into the engine, increasing power and fuel efficiency. TBs are highly sophisticated devices – the TB’s turbine spins at up to 150,000 RPMs, yet the distance between the spinning turbine and the wall of the TB can be as small as a seventh the width of a human hair. GTX’s years of R&D allow them to deliver products that competitors cannot match. As a testament to this, Bosch and Mahle, two of the largest auto suppliers in the world, launched a TB joint venture in the late 2000s with the explicit blessing and support of GTX’s customers, the auto OEMs. A scaled competitor teaming up with your customers to break your duopoly is a business nightmare, yet after a decade, Bosch-Mahle gave up and exited the space. They could not match GTX’s products. Finally, the TB is a critical component of an engine, which is, in turn, the most important component of a car. Engines are designed years in advance, and once a product is designed into an engine, it is virtually impossible to design out. Once Mercedes designs a Garrett TB into an AMG engine, GTX has an almost guaranteed 100% renewal product with a multi-year life cycle. GTX’s backlog is exceptionally sticky and 90% booked 3+ years out. While BEV is a wild card, GTX has visibility on its core operations for years…” (Click here to read the full text)
2. Expand Energy Corporation (NASDAQ:EXE)
Oaktree Capital Management’s Q4 Stake: $690.6 million
Number of Hedge Fund Holders: 71
Expand Energy Corporation (NASDAQ:EXE) operates as an independent exploration and production company. It purchases, explores, and develops properties for the production of oil, natural gas, and natural gas liquids.
On March 20, Benchmark analysts reiterated their Buy rating and $93 price target on Expand Energy Corporation (NASDAQ:EXE). The Benchmark team expects Expand Energy to produce an EPS of $1.69 and an EBITDA of $1.19 billion in the first quarter of 2025. These statistics are higher than the average forecasts of $1.59 EPS and $1.17 billion EBITDA.
The company posted fourth-quarter 2024 results that were above analyst forecasts, with earnings per share of $0.55, compared to $0.43. Revenue also topped estimates, totaling $2 billion versus an expected $1.85 billion. Expand Energy Corporation (NASDAQ:EXE) also plans to significantly decrease debt and increase shareholder returns in 2025, with the goal of reducing net debt to less than $4.5 billion by the end of the year.
1. TORM plc (NASDAQ:TRMD)
Oaktree Capital Management’s Q4 Stake: $779.8 million
Number of Hedge Fund Holders: 11
TORM plc (NASDAQ:TRMD) is a shipping company that owns and manages a fleet of product tankers in the United Kingdom. The company mainly carries petroleum goods, including gasoline, kerosene, and jet fuel.
TORM plc expanded its fleet last year by buying eight second-hand Medium Range (MR) vessels for $371 million. This acquisition continues TORM’s history of acquiring used vessels for fleet expansion, with the company adding seven LR1 vessels constructed between 2011 and 2013 to its ownership back in 2023.
TORM plc (NASDAQ:TRMD) recently announced fourth-quarter 2024 results that were above analysts’ expectations, with earnings per share of $0.77 vs a projection of $0.61. The firm also reported higher-than-expected revenues of $214.7 million, compared to a projection of $211.57 million. Looking ahead, the company expects TCE earnings in 2025 to be between $650 million and $950 million, down from $1.135 billion in 2024. TORM also estimates EBITDA for 2025 to range between $350 million and $650 million.
While we acknowledge the potential of TRMD as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TRMD but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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