Howard Marks’ Oaktree Capital Management has taken a new position in Century Communities, Inc (NYSE:CCS), which first went public last summer. The filing with the SEC, which was released yesterday, but dated back to January 16, reveals that Oaktree has built a 1.28 million share position in the home-builder, giving them a 5.9% passive stake.
Oaktree Capital Management was founded by Howard Marks in 1995, and is based in Los Angeles. The fund holds a diverse equity portfolio that was valued at just over $6 billion as of September 30, and focuses on alternative investments, ones which are sometimes even viewed as contrarian to general thinking. This is the only latest new position for Oaktree, which has also recently disclosed positions in Banc of California Inc (NYSE:BANC) and Eagle Bulk Shipping Inc. (NASDAQ:EGLE), as well as a greatly increased position in Star Bulk Carriers Corp (NASDAQ:SBLK), which they have held since the third quarter of 2013.
While Oaktree may have a penchant for alternative investments, in the case of Century Communities, Inc (NYSE:CCS), our tracked hedge funds have shown a lot of early interest in them, and have in fact been more bullish on them than any other funds. Though only one of them has built a stake large enough to require disclosure with the SEC, that being Christian Leone’s Luxor Capital Group, which held 1.35 million shares as of September 30. Luxor, Claren Road Asset Management, managed by Brian Riano, John Eckerson, Sean Fahey and Albert Marino, and Michael Thompson’s BHR Capital were the top three shareholders of Century among institutional investors. Claren Road held 977,500 shares as of September 30, while BHR held 800,000.
In Century Communities, Inc (NYSE:CCS), these funds are investing in a high-end home-builder which currently operates in four U.S states; Colorado, Nevada, Texas, and Georgia. The company has been offering new homes since 2002, and is now recognized as one of the top 50 homebuilders in the U.S. In addition to move-in-ready homes, they also offer clients the option to personalize their home and get involved in all aspects of the design process, from choosing the light fixtures, countertops, and flooring, to planning out colors and styles.
Century Communities, Inc (NYSE:CCS) has made a number of acquisitions in recent months to help propel them into new markets, including the purchase of Atlanta, Georgia’s Peachtree Communities in November for approximately $55 million, which netted them homes under construction and model-homes in 36 different communities through the Greater Atlanta area, with a total of 2120 owned and controlled lots. In August, they acquired Houston, Texas’ Grand View Builders for approximately $14 million, which added another 601 owned and controlled lots in 13 communities to their portfolio.
Despite the acquisitions and growth, Century Communities, Inc (NYSE:CCS) has struggled since going public with 4.48 million shares priced at $23 in June. The share price is down 30% from the offering price, entering today at just $15.99. Much of that decline occurred from the middle of July to the middle of October, and took another hit in November when Century released their third quarter earnings for 2014. Despite an increase in revenue year-over-year of 118.6% to $90.70 million, their revenue fell well short of analysts estimates of $112.20 million. Likewise, their earnings per share of $0.19 were well off the $0.39 EPS mark predicted by analysts.
Despite that, analysts remain as bullish on the stock as our tracked funds are. The two most recent analysts to initiate coverage on Century Communities, Inc (NYSE:CCS), Sterne Agee and Sidoti, both bestowed ‘Buy’ ratings on it, while JP Morgan has a $22.00 target price on Century, a 37.5% premium above its current level.
Given that only 0.05% of Oaktree’s equity portfolio was devoted to real estate stocks as of September 30, we find this move to be a noteworthy one, and an indication of how strongly Oaktree feels about it at current levels, and possibly the potential growth for the U.S housing market as a whole after another sluggish year in 2014.
Disclosure: None
