Billionaire Marc Lasry’s Favorite Stock Picks

Marc Lasry co-founded Avenue Capital in 1995 and has enjoyed great success investing in distressed and undervalued debt and equity. The fund’s management team looks for investment opportunities among industries in transition and managed approximately $11.6 billion worth of assets at the end of April. Avenue Capital’s equity portfolio comprised 19 positions and carried a value of $453 million at the end of the first quarter according to its latest 13F filing. The fund has large exposure to the transportation and consumer discretionary stocks, which account for 31% and 28% of the portfolio respectively. During the first quarter, Lasry and his team have reduced a large number of Avenue Capital’s positions, having increased only one at the same time. So, in this article we’ll analyze how these changed have impacted the fund’s top bets.

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Trimmed Exposure to Meritor

Meritor Inc (NYSE:MTOR) stepped down one a peg in Avenue Capital’s hierarchy, as Lasry and his team dumped a third of their holding during the first quarter. According to its latest 13F filing, the fund now holds 4.85 million shares worth $39.1 million. Larry Robbins‘ Glenview Capital held the largest stake in Meritor Inc (NYSE:MTOR) at the end of the quarter among the funds followed by Insider Monkey. The fund indicated ownership of 8.12 million shares in its latest quarterly report, a position valued at $65.5 million. The manufacturer of auto parts has recently reported fiscal second quarter results that largely met Wall Street’s expectations. Meritor Inc (NYSE:MTOR) earned $32 million or $0.41 per share, adjusted for one-time costs, while revenues came in at $821 million. The consensus among analysts was $0.41 per share on the back of $840 million in revenues. The stock fell by as much as 30% in the beginning of 2016, before staging a comeback and regaining all the lost ground. Since then, however, it has been trending sideways in a range between $7.50 and $8.50 per share.

Sold Some YRC Shares

Avenue Capital also reported a reduction in its holding in YRC Worldwide Inc (NASDAQ:YRCW) at the end of the first quarter. The fund holds 4.79 million shares, down by 19% over the quarter, reportedly worth $44.7 million. Mike Masters, on the other hand, has boosted his fund’s holding of the stock by 116% by the end of March. Masters Capital Management reportedly holds 2.45 million shares valued at $22.8 million. A provider of various transportation services, YRC Worldwide Inc (NASDAQ:YRCW) has a market cap of $293 million and does not pay a dividend. The stock is currently trading at a Price-to-Earnings (P/E) ratio of 27, higher than the industry average of 21. The stock is down by around 36% since the beginning of the year. For the first quarter, YRC Worldwide Inc (NASDAQ:YRCW) reported a loss of $0.37 per share on $1.12 billion in revenue, while analysts were expecting $1.14 billion in revenue and a loss of $0.38 per share.

Turn the page to find out which are the fund’s current top three bets.

Marc Lasry and his team decided to leave their investment in Gener8 Maritime Inc (NYSE:GNRT) unchanged, as Avenue Capital continued to hold 7.21 million shares valued at $50.9 million at the end of the first quarter. Oaktree Capital Management’s Howard Marks is also keeping an eye on the stock, as the fund holds a little over 13 million shares valued at 92.1 million. Gener8 Maritime Inc (NYSE:GNRT)’s popularity among the funds followed by Insider Monkey registered a boost over the quarter, with the number of long positions having increased to 20, from 18 a quarter before. Together, these funds hold more than half of the company’s common stock. Seaport Global Securities has recently initiated coverage of Gener8 Maritime Inc (NYSE:GNRT) and has assigned a ‘Buy’ rating with a price target of $15 per share.

Not So Optimistic About the Publishing Business?

Former number one bet, Houghton Mifflin Harcourt Co (NASDAQ:HMHC) stepped down a notch after Avenue Capital’s management decided to reduce its exposure. According to its latest 13F filing, the fund holds 3.15 million shares, down by 27% from the fourth quarter, worth approximately $62.9 million. Glenn J. Krevlin‘s Glenhill Advisors also holds a sizable position in Houghton Mifflin Harcourt Co (NASDAQ:HMHC): 7.65 million shares worth $152 at the end of the quarter. The publishing company reported first quarter results on May 4, missing analyst’s estimates. The company registered a loss of $1.34 per share on the back of $205.8 million in revenue, while market participants were expecting $199.6 million in revenue and a loss of $1.17 per share. Houghton Mifflin Harcourt Co (NASDAQ:HMHC) has recently named Joseph Abbott, a former banker, as its new Chief Financial Office, replacing Eric Shuman. The company filed for bankruptcy in 2012 as it was struggling to repay its debts. It emerged out of bankruptcy protection a month later and went public after 17 months.

Time To Buy Dynergy?

Dynegy Inc. (NYSE:DYN) is the only stock Marc Lasry and his team decided to increase exposure to. Avenue Capital’s stake in the company was boosted by 86% during the quarter to 6.08 million shares valued at $87.3 million, making it the new top equity position. Clint Carlson, on the other hand, chose to reduce his fund’s exposure to Dynegy Inc. (NYSE:DYN), having dumped 14% of its stake during the quarter. According to its latest 13F filing, Carlson Capital holds 8.1 million shares worth $116 million. Although it fell by as much as 45% by mid February, the stock staged a remarkable rally, climbing back to green territory and is 54% in the green year-to-date. Dynegy Inc. (NYSE:DYN) is currently trading at a P/E multiple of 12, slightly lower than the industry average of 14. The company’s revenue rose by 77% in the first quarter to $1.12 billion, while the loss per share narrowed to $0.13 per share from $1.49 reported a year before.

Disclosure: none.