Billionaire Howard Marks‘ Oaktree Capital Management recently filed its 13F with the Securities and Exchange Comission (SEC) for its equity holdings as of March 31, 2015. Although the fund primarily invests in debt, it has a sizeable equity portfolio worth over $9.4 billion. Marks started Oaktree after spending after a decade long stint at the TCW Group, prior to that he worked that Citicorp. Since its inception, the distressed-debt funds run by Oaktree have had an annualizzed gains of over 19 percent after fees, considerably better than the distressed-debt funds operated by its peer group. According to the latest 13F filing Oaktree’s top 10 stock holdings constitute almost half of its equity portfolio and nearly one fourth of the portfolio is constituted of stocks from the consumer discretionary space. During the March quarter Oaktree added 30 new stocks to its equity portfolio and in this article we are going to focus on top three of these new additions – Actavis plc (NYSE:ACT), America Movil SAB de CV (ADR)(NYSE:AMX), and Alibaba Group Holding Ltd(NYSE:BABA).
Large funds like Oaktree Capital Management usually holds over hundred stocks in its equity portfolio at any given point of time with most of the equity tied up to blue chip stocks, but our research has shown that it is mostly a fund’s stock-cap picks that lead to outperformance rather than the better known large-cap stocks. Historically these stocks beat the market by double digits. In 2014 when then S&P 500 ETF (SPY) posted gains of 13.5%, equity hedge funds overall posted gains of only 1.4% whereas Insider Monkey’s small-cap strategy, which tracks the 15 most popular small-cap stock among hedge funds, generated an impressive return of 28.2% for the same period. Since its inception in August 2012 till April 2015, our small-cap startegy has outperformed the S&P 500 ETF (SPY) by over 85 percentage points and continues with its outperformance (read the details here).
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Oaktree initiated a stake in Actavis plc (NYSE:ACT) in the March quarter by buying 65,500 shares of the company valued at $66.29 million. As we recently highlighted in one of our articles Actavis plc (NYSE:ACT) has been the top pick of billionaire hedge fund investors for the March quarter not only in the healtch care space, but overall as well. The company completed its $67 billion acquisition of Allergan, Inc.(NYSE:AGN) in the first-quarter of this year, a deal that got significant coverage on the Street as Actavis plc (NYSE:ACT) managed to outbid the offer made by Valeant Pharmaceuticals Intl Inc(NYSE:VRX) and Bill Ackman‘s Pershing Square Capital for Allergan, Inc.(NYSE:AGN). Shares of Actavis plc (NYSE:ACT) have been on a constant uptrend since last year, up by around 40% and have returned over 16% year-to-date. During the March quarter legendary hedge funders like John Paulson, Dan Loeb, Stephen Mandel and Barry Rosenstein had Actavis plc (NYSE:ACT) in their equity portfolios.
America Movil SAB de CV (ADR)(NYSE:AMX) was the second-largest buy of Oaktree Capital in the March quarter. The fund bought 1.44 million shares of the company valued at $29.427 million as of March 31. In the last few quarters, America Movil SAB de CV (ADR)(NYSE:AMX) has been engaged in selling vast amount of its wireless assets to rival firms because of increasing pressure from Mexican antitrust authorities. However, some analysts believe that this will be good for the company in the long run as it will make it more efficient, competitive and will help ease regulatory pressure. On an average, analysts have a ‘Hold’ rating on the stock with a price target of $16.92, well below its current trading price of above $21. Apart from Oaktree, Jim Simons’ Renaissance Technologies and David Kowitz And Sheldon Kasowitz’s Indus Capital also initiated a stake in the company in the March quarter.
Alibaba Group Holding Ltd(NYSE:BABA) turned out to be the third-largest new pick of Oaktree in the March quarter and that can be solely due to the drop in the company’s stock price in the quarter. Oaktree purchased 345,000 shares of Alibaba Group Holding Ltd(NYSE:BABA) during the quarter, which as of March 31 were valued at $28.718 million, just slightly below what America Movil SAB de CV (ADR)(NYSE:AMX) shares were worth on the same date. The company has been recently in news because of the Netflix, Inc. (NASDAQ:NFLX) like streaming service it plans to launch soon in China. On June 22, analysts at Morgan Stanley raised their price target on the company to $111.90 from $109. Of the 45 analysts on the Street who cover the stock, 37 have a ‘Buy’ rating on it. The shares currently trade near $85 levels, while the Street has a n average price target of $107.18 on them. Among the hedge funds we cover, Andreas Halvorsen’s Viking Global and George Soros‘ Soros Fund Management are also bullish on Alibaba Group Holding Ltd(NYSE:BABA), raising their stakes by 88% and 2% in the March quarter respectively.
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