It’s been over five years since Brookfield Corp. (NYSE:BN) acquired 61.2% of Oaktree Capital Group, the Los Angeles-based alternative asset manager co-founded by billionaire distressed debt and high-yield bond investor Howard Marks. 

Brookfield acquired a majority stake in Oaktree to gain Marks’ expertise in private and public credit, a complementary platform to those it already operated in private equity, real estate, infrastructure, and renewable power. 

Key Points About This Article:

• Oaktree Capital’s portfolio leans heavily on the energy industry.  
• It trimmed its largest holding and moved funds into a midstream energy play. 
• The alternative asset manager leans on equities and fixed-income securities for performance.
• Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “2 Legendary High-Yield Dividend Stocks” now.

“This transaction enables us to broaden our product offering to include one of the finest credit platforms in the world, which has a value-driven, contrarian investment style, consistent with ours,” Brookfield CEO Bruce Flatt said.

When you look at Oaktree’s 13F quarterly holdings reports, you’ll first notice that a significant chunk of it is invested in convertible bonds rather than common stocks. That’s a function of its focus on debt.  

In the latest 13F, which ended Sept. 30, 2024, Marks’ firm had $6.24 billion invested in 168 securities. Of these, 106 were convertible bonds, while the remainder were primarily stocks, with warrants and ETFs rounding out the holdings. 

Howard Marks’ Oaktree Capital Sold a major holding in the third quarter and reinvested the proceeds in the energy sector. Here’s a closer look.

Oaktree Went Nuclear in the Latest Quarter

 

While Oaktree sold out of three stocks entirely in the quarter ended Sept. 30 and reduced its holdings in 11 other stocks, its largest holding, Torm PLC (NYSE:TRMD), was easily its most significant sale in Q3 2024. 

The alternative asset manager sold 3.53 million shares of Torm, a UK-based company that owns 90 shipping tankers it uses to transport refined petroleum products such as diesel oil, gasoline, jet fuel, and naphtha. 

The share sale reduced Oaktree Capital’s holdings in Torm to 40.58 million shares, worth $1.38 billion at the end of September. This accounted for nearly 22% of its portfolio, down from 27.4% at the end of June. Based on the average of its high ($40.47) and low ($32.26) during the third quarter, Oaktree is estimated to have generated $128 million from the sale. 

Much of the proceeds were used to buy nearly 700,000 shares of Talen Energy (NYSE:TLN), one of 10 new stocks added to the Oaktree portfolio during the third quarter. 

According to WhaleWisdom.com, it paid an average price of $178.29 a share for the independent power producer, whose assets include the Susquehanna nuclear facility, which generates 2.5 GW (gigawatts) and accounts for half of its annual power generation. 

Nuclear energy is hot entering 2025. Oaktree clearly saw the benefit of making it the alternative asset manager’s 11th-largest position.

Energy Was a Big Focus

Talen Energy wasn’t the only new energy holding Oaktree bought during the quarter. It also purchased 2.05 million shares of California Resources (NYSE:CRC), the largest oil and gas producer in California, and 2.53 million shares of EnLink Midstream (NYSE:ENLC), a Dallas-based provider of midstream oil and gas services.

Interestingly, Oaktree is thought to have paid $13.63 a share for its EnLink holdings during the third quarter. On Nov. 24, after the third quarter ended, EnLink announced that Oneok (NYSE:OKE) would acquire the midstream operator for $4.3 billion in stock. 

Shareholders will receive 0.1412 shares of Oneok stock for every EnLink share held. To complete the purchase, Oneok anticipates issuing 37 million shares, representing 6% of its outstanding shares. Oneok has been working on completing the merger since it acquired Global Infrastructure Partners’ stake in EnLink for $3.3 billion in October 2024.

Based on the estimated price paid per EnLink share, Oaktree’s unrealized gain is approximately $5.4 million. This is not a huge return, but in less than a quarter, Howard Marks’ firm will probably take it.

A Concentrated Portfolio Lies Beneath

Although Oaktree owned approximately 60 stocks at the end of September, it had 15 names with at least $100 million invested. The top 15 accounted for $3.9 billion or 62% of its $6.24 billion net assets, which includes the 106 convertible bonds. 

It’s not unusual to see top billionaire investors invest most of their portfolios in a few key names. Warren Buffett has 66% of Berkshire Hathaway’s (NYSE:BRK.B) $295 billion equity portfolio invested in five stocks and that’s after the Oracle of Omaha cut the holding company’s Apple (NASDAQ:AAPL) position by nearly half over the past two years.    

The question of whether concentrated portfolios outperform diversified ones has been around for as long as people have invested in stocks. 

S&P Dow Jones Indices conducted a 2016 study that examined whether concentrated portfolios improved portfolio managers’ performance. The study concluded that “high-conviction” portfolios tended to underperform on a risk-adjusted basis, obscuring managers’ actual skill level. 

Billionaires like Howard Marks of Oaktree Capital tend to construct their portfolios by combining high conviction with diversification. 

That’s a good thing for their clients. 

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