In this article, we will take a look at Billionaire Howard Marks’ Top 10 Stock Picks.
A decade of peerless returns. That’s what billionaire investor Howard Marks expects in the aftermath of Donald Trump’s assuming the position of the leader of the biggest economy in the world. He expects the US economy to remain the envy of the world and grow in strength with the slashing of red tape and easing taxes.
“Warren Buffett said it: don’t bet against the United States. He’s probably right about that,” the Wall Street veteran told the Sohn Hearts & Minds investment conference in Adelaide.
The remarks followed Trump’s big win against Democrat rival Kamala Harris, which ended up sparking a surge in stocks. Initially, US equities rallied to record highs as investors reacted to a potential slash in interest rates and taxes and an easing of regulatory pressure.
READ ALSO: 10 Cheap Value Stocks to Invest In, According To Seth Klarman and 10 Cheap Value Stocks to Invest in According to Warren Buffett.
Fast forward, equities have pulled back significantly amid growing concerns about valuations. Worries that the Federal Reserve might not cut interest rates aggressively due to a potential spike in inflation on Trump tariffs have also left the markets on edge.
In mid-last year, the founder of Oaktree Capital Management raised concerns over high debt loads in private equity and real estate. Marks reiterated that the sectors would remain under pressure should interest rates stay higher for longer.
“The leverage, the use of debt to amplify your returns, has been the lifeblood of these two asset classes,” Marks said in an interview with Bloomberg. Amid growing concerns about the long-term impact of the high interest rate environment, Marks has moved to strengthen Oaktree Capital Management’s exposure in the energy sector. Energy holdings account for the most significant share of the hedge fund portfolio, having carried out significant changes in the third quarter of last year.
Increased focus on energy holdings does not come as a surprise. Marks is looking to take advantage of the growing demand for energy amid the artificial intelligence revolution. One of his energy holdings is already pushing for a deal with a tech giant that needs clean nuclear energy to power its data centres.
In addition to focusing on energy holdings, the founder of Oaktree Capital Management remains bullish about investment opportunities in China. Despite China’s slow recovery from the COVID-19 pandemic causing it to lose favor among investors, Marks sees numerous attractive investment opportunities still available.
“Clearly, China is on the pile of things that people feel ill about, and it’s on that pile that you find the bargains,” he said. “That doesn’t mean that you should buy everything on the pile, but that’s where you look for the castoffs and the bargains.”
The focus on Chinese equities does not come as a surprise, as Marks believes US equities are “high priced.” Therefore, bargains in China are more appealing. Consequently, the billionaire investor expects Chinese growth to exceed other countries in the near future, including the US.
Howard Marks of Oaktree Capital
Our Methodology
We scanned Oaktree Capital Management’s portfolio to make the list of billionaire Howard Marks’ top 10 stock picks. We then settled on the hedge fund’s biggest holdings and examined why they stand out as the top stock picks. Finally, we ranked the stocks in ascending order based on the hedge fund’s stake value.
At Insider Monkey, we are obsessed with 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Billionaire Howard Marks’ Top 10 Stock Picks
10. Freeport-McMoRan Inc. (NYSE:FCX)
Oaktree Capital Management’s Stake Value: $121.07 million
Number of Hedge Fund Holders: 74
Freeport-McMoRan Inc. (NYSE:FCX) is a basic materials company that mines mineral properties. It primarily explores copper, gold, molybdenum, silver, and other metals. The company is strategically positioned to capitalize on growing copper demand as the world shifts towards renewable energy and electrification.
The International Energy Agency predicts that by 2050, global copper demand will have increased by at least 60%. The red metal’s prices are expected to increase by over 40% over the next two years, according to analysts at Jefferies (JEF.N), which opens a new opportunity for growth. Freeport-McMoRan Inc. (NYSE:FCX) has long concentrated on copper production, accounting for 9% of global supplies and more than any other company. Now, it is in the unique position of being able to focus on growing the mines it already owns without being distracted by a buyout.
The company has been making notable progress, especially in Indonesia, where it explores copper, gold and silver properties. In line with earlier projections, the company recently started commissioning its new Indonesian smelter, indicating its dedication to value-added production and vertical integration. The company’s processing capacity is anticipated to increase as a result of the milestone, which might also strengthen its position in the local market. Strong commodity prices and operational efficiencies seem to be the main drivers of Freeport-McMoRan Inc.’s (NYSE:FCX) promising financial future. The business made $25.64 billion in sales over the previous 12 months, with a remarkable 41.28% gross profit margin. According to analysts, if spot prices stay high, the company could produce about $4.8 billion in free cash flow (FCF) in 2025.
9. Talen Energy Corporation (NASDAQ:TLN)
Oaktree Capital Management’s Stake Value: $124.18 million
Number of Hedge Fund Holders: 68
Talen Energy Corporation (NASDAQ:TLN) is an independent power producer and infrastructure company that produces and sells electricity, capacity, and ancillary services into wholesale power markets. It was the best-performing stock in billionaire Howard Marks’ portfolio, going by its 261% gain in 2024. The gain came from the company emerging as one of the biggest beneficiaries of the growing demand for energy to power the artificial intelligence revolution.
Talen Energy Corporation (NASDAQ:TLN) is well-positioned for significant long-term growth due to its established dominance in the corporate Power Purchase Agreement (PPA) market. Talen Energy’s knowledge of renewable energy is becoming more and more valuable as more businesses pledge to renewable energy goals and look to guarantee a steady supply of electricity at fixed costs.
Being in a position of leadership is seen as a strategic advantage that could help the business secure long-term financial visibility and grow its contracting portfolio. Nevertheless, Talen Energy Corporation (NASDAQ:TLN) suffered a massive setback late last year as the Federal Energy Regulatory Commission rejected its interconnection agreement for an Amazon data center in Pennsylvania. The company had a data center connected to its nuclear plant and planned to increase its capacity to 480 megawatts from 300 megawatts. Talen has already appealed FERC’s rejection.
ClearBridge Value Strategy stated the following regarding Talen Energy Corporation (NASDAQ:TLN) in its Q4 2024 investor letter:
“We added several new positions during the quarter and updated our utilities and energy exposure. In utilities, we bought Talen Energy Corporation (NASDAQ:TLN), an independent power producer which sells electricity, capacity, and ancillary services into wholesale power markets, which we funded by exiting our position in Constellation Energy. Although both companies are merchant power producers that stand to benefit from higher power prices as AI data centers are brought online, we believe that Talen’s stock price has milder embedded expectations than does the more optimistic Constellation. As a result, we believe that Talen represents a much more attractive risk/reward tradeoff that still capitalizes on the strong, long-term trend toward higher power prices.”
