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Climbing Out of OAK; Joining the Gold Bugs: Best of Kass By Doug Kass | Oct 09, 2015 | 09:00 PM EDT

NEW YORK (Real Money) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.

This past week, Kass made some fairly surprising changes to his portfolio, selling a longstanding position in an investment firm, and going long in a commodity he has always shunned before: gold.

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Harvesting the Mighty OAK

Originally published Oct. 6 at 3:37 p.m. EDT

Oaktree Capital Group (OAK - Get Report) is "best of class," whether measured by caliber of management, historic (and prospective) assets-under-management growth, or by the long-term delivery of superior investment returns to its clients.

However, I have sold my longstanding investment position in OAK today and I am removing the stock from my Best Ideas List, where it has been for 14 months.

There is absolutely no rush or panic to sell, but I have sold based on some of these issues:

  • While Oaktree's intermediate-term prospects are exceptional, particularly relative to its peers, the near-term profit outlook is increasingly cloudy, with the incentive portion of the company's income in jeopardy if markets slip further and with fund flows problematic.
  • A turn-away and de-risking from risk assets will likely result in lower assets under management for even the best managers, such as Oaktree. Indeed, in a worst-case scenario, OAK could be seen as an "ATM," as is often the case that the best managers are not immune to industry headwinds.
  • Given the nature of the fee/incentive investment management business, short-term results are hard to gauge. Over the last four quarters the company beat twice (fourth quarter of 2014 and first quarter of 2015) and missed twice (third quarter of 2014 and second quarter of 2015), mostly by wide amounts. Given the current volatile state of the markets...