Howard Marks' Oaktree Pulls Back Star Bulk Carriers Holding

2nd reduction of the year for the guru's top holding

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Jul 09, 2021
Summary
  • Star Bulk Carriers shares on the rise after solid first-quarter earnings
  • Oaktree shrinks its position by 8.4% with the sale of 2.38 million shares
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Howard Marks (Trades, Portfolio)’ Oaktree Capital Management has revealed a reduction in its top holding Star Bulk Carriers Corp. (SBLK, Financial) according to GuruFocus’ Real-Time Picks, a Premium feature.

Since the formation of Oaktree in 1995, Marks has been responsible for ensuring the firm's adherence to its core investment philosophy, communicating closely with clients concerning products and strategies and managing the firm. Oaktree is involved in less efficient markets and alternative investments. The firm invests heavily in debt, preferred stocks and convertible bonds.

On June 24, the firm sold 2.38 million shares of Star Bulk Carriers (SBLK, Financial), reducing the holding by 8.4%. Share prices continued to climb to an average price of $23.97 per share on the day of the sale. The sale had a -0.95% impact on Oaktree’s portfolio, and GuruFocus estimates the firm has lost 17.16% on the holding. Overall, Oaktree has cut the holding by 35.65% in the second quarter of 2021, yet the holding remains the top-weighted position in the portfolio.

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Star Bulk Carriers provides seaborne transportation solutions in the dry bulk sector. The company owns and operates dry bulk carrier vessels, which are used to transport major bulks such as iron ore, coal, grains, bauxite, fertilizers and steel products. It owns a fleet of vessels that consists of Newcastlemax, Capesize, Post Panamax, Kamsarmax, Panamax, Panamax and Supramax. It generates revenues through the voyages it carries out.

As of July 9, the stock was trading at $20.36 per share, up 1.75%, with a market cap of $2.05 billion. According to the GF Value Line, the shares are trading at a significantly overvalued rating.

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GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rank of 4 out of 10. There are currently four severe warning signs issued for the company, including poor financial strength and days inventory building up. The company’s cash-debt ratio of 0.12 ranks it worse than 77.20% of competitors and it has struggled with profitability as the return on invested capital has remained low.

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The company’s latest earnings release in May showed strong growth in revenue year over year after the company struggled in 2020. Voyage revenues jumped almost $40 million compared to the year ago quarter, supporting much stronger cash flows and the company’s announcement of a substantial increase in its dividend payout to 30 cents per share.

Marks’ Oaktree is currently the top shareholder with 25.42% of shares outstanding. Other top gurus invested include Jim Simons (Trades, Portfolio) and a recent new buy from Pioneer Investments (Trades, Portfolio).

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Portfolio overview

The firm’s portfolio contained 61 stocks, with eight new holdings on July 9. It was valued at $6.03 billion and has seen a turnover rate of 19%. Star Bulk Carriers is the firm’s top holding with Vistra Corp. (VST, Financial), Chesapeake Energy Corp. (CHK, Financial), Ally Financial Inc. (ALLY, Financial) and Torm PLC (TRMD, Financial) following closely behind.

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By weight, the top three sectors represented are energy (21.19%), financial services (16.77%) and industrials (13.54%).

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Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure