There are two investor letters that Warren Buffett reads as soon as they are released.
The first is the annual shareholder letter from Jamie Dimon, the chairman and CEO of JPMorgan Chase
The second are the letters by Howard Marks, the founder and chairman of Oaktree Capital Group
Oaktree goes public
Although investors have had the opportunity to invest with Jamie Dimon for some time now, Howard Marks' company only had its initial public offering this week. Given Buffett's feelings toward him, is Oaktree a new issue that investors should buy?
If the market's reception to Oaktree's initial public offering on Wednesday night is any indication, the answer appears to be "no." According to reports, the company had originally intended on selling 10.3 million shares in a range of $43 to $46 a share. When all was said and done, however, it was only successful at pricing 8.84 million shares at $43, raising an estimated $380.3 million. Because the offering represented about 6% of the company's outstanding shares, this values Oaktree at $6.5 billion.
While it certainly didn't help that the market had been down this week on fears from Europe and a dismal March jobs report, the lack of interest in Oaktree's offering is more likely related to the line of business it's in. Namely, because of the convoluted structure of private equity firms, public market investors struggle to value the performance fees in their funds. And it's for this reason that shares in many of Oaktree's peers have performed abysmally since going public.
For example, shares of Blackstone Group
At the end of the day
If investing were like horse racing, then it'd be foolish to pass up the opportunity to invest in a company led by a man that Warren Buffett holds in such high regard. However, as the market's reception of Oaktree demonstrates, there's clearly much more to it than simply picking a horse, if you will. It's business performance that matters most.
It's for this reason that I encourage you to check out one of our newest free reports: "The Stocks Only the Smartest Investors Are Buying." In it, you'll find the name of a major financial institution that Warren Buffett recently invested in, as well as the identity of a smaller firm that he would have likely purchased in his earlier years. To find out what companies I'm referring to, click here now -- it's free.