Oaktree Capital Group, LLC (OAK) is a leading investment firm in the turnaround and distressed securities area. It also invests in convertible securities, emerging markets, real estate and value-oriented public equities.
Oaktree’s assets under management have grown steadily over the years to about $91 billion today. After running up to the low 60’s early this year, the stock has fallen back to the low 50’s.
While Oaktree’s reported results can be somewhat lumpy because much of its revenue comes from the profits earned on the investments made by its funds, both the new funds and the existing funds also provide a steady flow of management fees.
In 2009 it provided started-up funds to a fixed income manager named Jeffrey Gundlach, who was setting up his own firm. That firm, Doubleline Capital, has become one of the largest and best known bond managers in the world, and it stands to benefit from the outflows from its competitor PIMCO following Bill Gross’ departure. As a 22% owner in Doubleline, Oaktree should profit handsomely.
We think the current weakness in Oaktree’s stock presents a good opportunity to buy into a premier money manager at a reasonable price. Moreover, while the dividend payout on the stock may be variable, Oaktree currently pays a generous dividend so that you get paid even if you have to wait a while for the firm to harvest a new crop of distressed opportunities. We recommend buying Oaktree up to 63.
George Putnam III, The Turnaround Letter, www.turnaroundletter.com, 617-573-9550, October 1, 2014
