Is Sitio Royalties Corp. (STR) the Best Stock to Buy According to Howard Marks’ Oaktree Capital Management?

In the ever-evolving landscape of the energy sector, investors are constantly on the lookout for the next big opportunity. One company that has caught the attention of Howard Marks and Oaktree Capital Management is Sitio Royalties Corp. (STR). Known for their cautious and balanced investment philosophy, Oaktree's interest in STR raises the question: is this the best stock to buy in the current market?



The Permian Basin: A Goldmine for Energy Investors

Sitio Royalties Corp. is a pure-play mineral and royalty company, focusing on investing in mineral and royalty interests in the Permian Basin and other productive U.S. oil basins. The Permian Basin, located in West Texas and southeastern New Mexico, is one of the most productive oil basins in the world. Its vast reserves and high production rates make it an attractive investment for energy companies.



Financial Performance: A Strong Foundation

STR's financial performance is characterized by a 3.40% year-to-date total return and a 5-year EPS diluted growth rate. The company's debt-to-equity ratio of 0.5414 indicates a conservative capital structure, which aligns with Oaktree's cautious investment philosophy. This financial prudence suggests that STR is well-positioned to navigate market volatility and maintain financial stability.

Market Position: A Small-Cap Powerhouse

STR is a small-cap/blend equity style company, which means it has a smaller market capitalization compared to larger mineral and royalty companies. However, its focus on the Permian Basin positions it well to benefit from the region's strong oil and gas production. This strategic focus allows STR to maintain a competitive edge in the market.

Growth Potential: Stable and Growing Income

STR's growth potential is supported by its investment in mineral and royalty interests, which provide a stable and growing stream of income. The company's focus on the Permian Basin, along with its low debt-to-equity ratio, positions it well for future growth. Additionally, STR's 5-year EPS diluted growth rate indicates that the company has been able to grow its earnings per share over time.

Howard Marks and Oaktree Capital Management: A Cautious Endorsement

Howard Marks and Oaktree Capital Management have identified STR as a standout investment due to its strong financial performance, market position, and growth potential. According to Marks, STR's focus on the Permian Basin and its low debt-to-equity ratio make it an attractive investment opportunity. Additionally, Oaktree Capital Management has noted that STR's investment in mineral and royalty interests provides a stable and growing stream of income, which is a key factor in their investment decision.

Conclusion: A Balanced Investment Opportunity

In conclusion, Sitio Royalties Corp. (STR) appears to be a compelling investment opportunity for investors seeking a balanced and cautious approach to the energy sector. Its focus on the Permian Basin, strong financial performance, and growth potential make it a standout investment according to Howard Marks and Oaktree Capital Management. However, as with any investment, it is important to conduct thorough due diligence and consider all potential risks before making a decision.