OAK - Oaktree Cap Group LLC

[no_thanks]

What do you think about this?  Looks like OAK should do well with this as a tailwind. 

 

http://www.businessweek.com/news/2013-12-10/oaktree-s-howard-marks-says-european-investing-to-accelerate

[giofranchi]

http://www.exploringmarkets.com:80/2013/11/howard-marks-insightful-conversation.html?m=1

 

 

Gio

[fareastwarriors]

Hard-to-Sell Junk Debt Lures Oaktree to JPMorgan

 

 

http://www.bloomberg.com/news/2014-01-23/hard-to-sell-junk-debt-lures-oaktree-to-jpmorgan-credit-markets.html

[giofranchi]

Oaktree Announces Fourth Quarter and Full-Year 2013 Financial Results

 

http://www.sec.gov/Archives/edgar/data/1403528/000140352814000016/exhibit991q42013.htm

 

• Adjusted net income per Class A unit grew 19% for the fourth quarter, to $1.62, and 57% for full-year 2013, to $6.38, as compared with the corresponding prior-year period, on higher incentive and investment income.

 

• Distributable earnings per Class A unit decreased 3% for the fourth quarter, to $1.33, and grew 52% for full-year 2013, to $5.82, as compared with the corresponding prior-year period, on continued strong fund realizations.

 

• Gross capital raised was $4.1 billion for the fourth quarter and $12.5 billion for full-year 2013, pushing AUM and management fee-generating AUM to $83.6 billion and a record $72.0 billion, respectively, despite strong fund realizations and distributions.

 

• GAAP net income attributable to Oaktree Capital Group, LLC grew 65%, to $64.9 million, and 106%, to $222.0 million, for the fourth quarter and full-year 2013, respectively, as compared with the corresponding prior-year period.

 

• Oaktree declares a distribution of $1.00 per Class A unit for the fourth quarter, bringing the full-year 2013 distribution to $4.66, up 59% over full-year 2012.

 

[saltybit]

Looks like they are gaining a toehold in China via Cinda, probably doing early homework if/when the Chinese credit markets encounter turmoil, like many people expect.

 

form the call:

John Frank - Principal Executive Officer and Managing Principal

Hey Danielle. So, most of you know that Cinda, which recently did its IPO in December is one of the leading distressed asset managers in China. That huge corporation has 18,000 employees. We've announced our mutual intent to create a joint venture. What we have in mind is that we will invest perhaps upto $1 billion, half from Cinda, half from our existing funds in investments that we each approve. In terms of the strategic rationale, we were enormously attracted to the opportunity to work with Cinda, there is no question who is the leading distressed real-estate investor in China and obviously their knowledge of the market and their expertise in China is peerless. At the same time, I think that they were attracted to our experience and expertise in distressed debt worldwide and a very long tenure.

 

So for us it’s an opportunity Danielle to learn more about China to invest shoulder-to-shoulder with probably the entity in China that is best positioned to invest in distressed assets, particularly distressed real-estate assets. So that’s obviously appealing to us. If we have -- it’s as I said in my prepared remarks very early to know how this will work out. Our colleague is Beijing right now talking with Cinda about the details. But if it works as we hope, we’ll learn a lot and hopefully we’ll be the partner to Cinda as well. If we have the opportunity to do that with other firms either in China or elsewhere, we absolutely would be delighted. But as I say, it’s a work in process, we’ll see how it goes, but we’re optimistic and very excited.

[giofranchi]

Oaktree prices secondary as insiders cash out - 8:39 AM

•5M units offered by insiders were (apparently) priced at about $60 per share for about $300M in gross proceeds. The underwriter greenshoe option is for another 750K shares.

•OAK -2.9% to $59.40 premarket

 

 

Gio

 

[nnayyar]

Out of curiosity, why do you think OAK would do this and dilute their existing shareholders to pay insiders? The headline reads bad but can't imagine they are doing it to screw investors over?

[giofranchi]

Out of curiosity, why do you think OAK would do this and dilute their existing shareholders to pay insiders? The headline reads bad but can't imagine they are doing it to screw investors over?

 

I cannot truly tell… but no, they are certainly not letting shareholders down… My idea is simply that this kind of dilutive moves are unavoidable once in a while, if you want to grow and at the same time distribute a very large portion of your earnings… see for instance MLPs.

 

Gio

 

[valiant]

I don't think this is a dilution - this is a organized liquidation event for insiders.

[james22]

Anyone like OAK today (at its lowest P/B in 5 years)?

[giofranchi]

Anyone like OAK today (at its lowest P/B in 5 years)?

 

I always like OAK very much!

It is just that in Italy I must give away in taxes almost 50% of their distributions… If they didn’t pay any dividend at all, my firm’s investment in OAK would be huge! ;)

 

Gio

 

[james22]

Yeah, I'm interested, but the K-1 form raises the Buy bar.

 

Too bad.

 

Wish was KMR/EEQ-like.

[no_thanks]

Yeah, I'm interested, but the K-1 form raises the Buy bar.

 

Too bad.

 

Wish was KMR/EEQ-like.

 

Mind elaborating?  I'm pretty slow...

[james22]

Sorry.

 

Because dealing with the K-1 form is a hassle, OAK must be especially attractive for me to buy.

 

If OAK were like KMR/EEQ (which do not require the form), I might buy today.

[Zorrofan]

I don't think this is a dilution - this is a organized liquidation event for insiders.

 

typically a sign insiders are getting out near the high......

 

cheers

Zorro

[Picasso]

Anyone buying OAK down here in the 40's?  It has been hit pretty hard over the past week and a recent VIC article highlighted fair value on their assets much higher than 48.

[james22]

Enterprising investors can purchase one of the world's savviest investment managers with still-large growth prospects and a wonderfully cash-generative model at 12 times my estimate of its normalized free cash flow—a strikingly cheap price for a spectacular business.

 

http://www.fool.com/investing/value/2014/06/26/why-im-buying-more-oaktree-capital.aspx

[fareastwarriors]

a loss for AIG but

 

Oaktree Capital Chooses Jay Wintrob as C.E.O

 

 

http://dealbook.nytimes.com/2014/10/06/oaktree-capital-chooses-jay-wintrob-as-c-e-o/?module=BlogPost-Title&version=Blog Main&contentCollection=Asset Management&action=Click&pgtype=Blogs&region=Body

[no_free_lunch]

In aggregate, we think the mispricing exists due to:

 

The market not recognizing the tailwinds to the alternative asset industry.

Investors pricing the units at a discount to traditional asset manager despite far stickier assets, incentive fees and lock-ups on 73% of assets for 10-11 years.

The counter-cyclical aspect of the shares are likely underappreciated given the firm's ability to significantly raise assets during downturns and management to time corrections.

The hidden assets on and off the balance sheet including the DoubleLine stake, corporate assets, and accrued incentive fees.

The units are largely trading based on yield which we think is inappropriate given the lumpiness in the realizations of their closed-end funds.

 

http://seekingalpha.com/article/2634415-oaktree-sum-of-the-parts-and-secular-tailwinds-point-to-undervalued-units

[no_free_lunch]

From the annual report:

 

Our closed-end funds have produced an aggregate gross IRR of 19.9% on over $62 billion of drawn capital.

..

Oaktree’s business model works throughout market cycles as our disciplined approach to managing growth and our diversified mix of strategies have produced strong earnings and cash flow, even during the global financial crisis of 2008-09. We’ve now generated positive adjusted net income for 18 consecutive years and paid quarterly distributions for 71 straight quarters.

..

 

http://www.oaktreecapital.com/annualletter/2013/

 

 

The more I learn about this company, and I have been following them for awhile via the various posts on this board, the more I like them.  As the previous article I posted points out, they are trading for about $27.50 when you back out cash & investments.    Incentive income & management fees should be $750M+ full-cycle, or with 20% tax, roughly $3.85 per share.  So at that rate you are getting the business for 7x earnings when investments are backed out.

 

I certainly have a lot to learn about the business so perhaps I am missing something.  I think I really need to dig into how realistic the incentive income is but their historical results are very strong so I don't why they couldn't do similar in the future.  It just seems that I can get a 5-10% yield (it will be quite variable), for X years, until the stock works it's way back up into the 60's.  That is a 33% capital gain (55% if you shoot for $70), and I am being paid to wait.

[no_free_lunch]

Baron's put out an article on OAK.

 

 

http://online.barrons.com/articles/oaktree-capital-will-prosper-when-the-debt-cycle-turns-1417234869

[biaggio]

Are there any Canadians holding this within their RRSP?

 

Should this security not qualify under the Canada-U.S. tax treaty exempting withholding tax on its dividend?

 

(Withholding tax is deducted from OAK dividends in my TD RRSP account.)

[EliG]

Are there any Canadians holding this within their RRSP?

 

Should this security not qualify under the Canada-U.S. tax treaty exempting withholding tax on its dividend?

 

(Withholding tax is deducted from OAK dividends in my TD RRSP account.)

 

See the first comment:

http://www.stockchase.com/company/view/4359/Oaktree-Capital-Group-referenced-by-David-Baskin

[sigis]

Are there any Canadians holding this within their RRSP?

 

Should this security not qualify under the Canada-U.S. tax treaty exempting withholding tax on its dividend?

 

(Withholding tax is deducted from OAK dividends in my TD RRSP account.)

 

I hold it in my BMO IL RRSP account, and haven't had tax deducted from dividends.

[giofranchi]

I know think my worries about the high taxes I pay in Italy on OAK’s distributions were excessive.

 

With an IRR of 20% sustained for 20 years and with new funds coming in each year (probably the money management industry will go through a drastic consolidation process, that will put out of business the many, while strengthening the very few), OAK might be able to increase its NAV at 15% compounded annual AND distribute the majority of its earnings. What truly matters is their ability to increase AUM at high CAGR, which has almost nothing to do with the distribution of fees and incentives.

 

During the conference call for Q3 2014 Kirchheimer had the following to say:

Total AUM of $93 billion as of September 30 was up 17% over the year earlier amount despite nearly $7 billion of distributions to investors in our closed-end funds.

And I would add: despite also the fact we are fast approaching the part of the cycle in which OAK has usually encountered the most difficulties in increasing AUM.

 

If I am wrong, please correct me. ;)

 

Gio