Billionaire Howard Marks Likes Bonds. He Likes These 3 Stocks More

Billionaire investor Howard Marks is known for his acumen in the credit markets. The firm he co-founded, Oaktree Capital Management, started in 1995. 

Marks’ investment career began as a research analyst at Citicorp Investment Management, where he stayed for 16 years, leaving in 1985 to lead and run Los Angeles-based TCW Group’s distressed debt, high-yield bonds, and convertible securities teams. He stayed for a decade before launching Oaktree.

In early March, the billionaire argued that the credit markets would provide more consistent and safer returns in the years ahead than the S&P 500 and equities. 

“From the S&P, you’re not going to get the historic return of 10% a year for the next decade. You will get something less and if that’s true, then the returns described from credit are quite competitive and dependable,” Marks said in a March interview with India’s Economic Times.

The interview was especially prescient when Marks suggested that the Trump administration should be careful how it implements changes to the government because if they go off the rails, the future events would not be pretty. 

The markets have spoken about how the president is handling his trade agenda. They will keep falling until investors feel the strategy is coherent and working.

Despite Marks’ love for credit, Oaktree’s top three holdings are stocks. Here’s why it owns each.

Key Points About This Article:

• Billionaire Howard Marks knows a thing or two about the credit markets. However, Oaktree Capital Management’s three largest holdings are stocks.
• The firm has done well on its original debt investment in Torm Plc (NASDAQ:TRMD).
• It’s also done well in energy, but its four-year bet on Garrett Motion (NASDAQ:GTX) has yet to reward its patience. 
• 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.

Oaktree Wins With Torm Plc Debt-to-Equity Exchange

The investment firm’s latest 13F said it had $5.64 billion invested in 165 securities, including stocks, convertible bonds, even ETFs and warrants to buy more stocks.

Torm PLC (NASDAQ:TRMD) is Oaktree’s largest holding, accounting for 13.57% of its portfolio, down from 22.10% at the end of September. Although the weighting for the owner and operator of oil tankers dropped by 853 basis points, that wasn’t due to the sale of shares but an increase in the portfolio’s value. 

Oaktree owns 41.49% of the UK-based firm through its parent, Brookfield (NYSE:BN). It is the largest shareholder, 10 times the next largest, Arrowstreet Capital, a Boston hedge fund. 

The investment firm owned a fleet of tankers managed by Torm. It hit financial troubles in late 2014, so Oaktree proposed merging its tankers with Torm’s existing business. Some of the lenders (Oaktree was one) had reservations. 

Ultimately, a debt-for-equity exchange happened on July 13, 2015, to appease the lenders. They got 99.2% of the merged company, and Oaktree became its largest shareholder. 

In December 2017, Torm listed its shares on Nasdaq to go along with its primary listing on Nasdaq Copenhagen. An affiliate of Oaktree owned 47.6 million shares and 64.4% of the company. Its shareholdings got as high as 53.81 million shares (65.8%) at the end of 2022. 

It has since sold off over 13 million shares at a substantial profit. 

Oaktree Expands Its Expand Energy Holdings

In the fourth quarter, Oaktree added 66,480 shares of Expand Energy (NASDAQ:EXE), America’s largest natural gas producer by production. 

That brought its stake in the Oklahoma-based company to 2.98%, accounting for 12.02% of its portfolio, 299 basis points higher than in Q3 2024. It is Oaktree’s second-largest holding after TRMD.

The investment firm first acquired shares in EXE in Q1 2021. Based on the estimated price paid per share of $44.60, it’s more than doubled its money in four years. 

Analysts generally like it. Of the 31 that cover it, 24 rate it a Buy (77%), well above 55.7%, the average for S&P 500 companies. Its average target price is $125.25, considerably higher than where it’s currently trading.

It trades at a low 10 times the 2026 analyst earnings per share estimate of $10.30.

Garrett Motion Needs a Boost

Oaktree’s third-largest holding at the end of December was Garrett Motion (NASDAQ:GTX), a manufacturer of turbochargers and electric boosting technologies for hybrid and electric powertrains. 

The investment firm first acquired shares in Garrett Motion in Q2 2022. It owns 44.08 million shares of the Honeywell (NYSE:HON) spinoff. Its shareholdings account for 6.93% of Oaktree’s assets. Oaktree owns 21.50% of the company, making it the largest shareholder. 

While it reported excellent Q4 2024 results in February, given the existing headwinds facing the automotive industry, combined with the tariff troubles in the weeks ahead, its share price has fallen 27% since the end of February. It now trades at its lowest point since October 2023. 

Oaktree hasn’t done nearly as well with this investment. It’s estimated to have paid an average price of $7.73 a share, higher than where it’s trading, delivering few gains on its four-year investment.

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