Reviewing Oaktree Specialty Lending (NASDAQ:OCSL) and Westwood Holdings Group (NYSE:WHG)
by Michael Walen · The Markets DailyWestwood Holdings Group (NYSE:WHG – Get Free Report) and Oaktree Specialty Lending (NASDAQ:OCSL – Get Free Report) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their risk, valuation, analyst recommendations, profitability, earnings, dividends and institutional ownership.
Risk and Volatility
Westwood Holdings Group has a beta of 0.56, meaning that its stock price is 44% less volatile than the S&P 500. Comparatively, Oaktree Specialty Lending has a beta of 0.5, meaning that its stock price is 50% less volatile than the S&P 500.
Dividends
Westwood Holdings Group pays an annual dividend of $0.60 per share and has a dividend yield of 3.2%. Oaktree Specialty Lending pays an annual dividend of $1.20 per share and has a dividend yield of 9.5%. Westwood Holdings Group pays out 68.2% of its earnings in the form of a dividend. Oaktree Specialty Lending pays out 250.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Insider and Institutional Ownership
56.6% of Westwood Holdings Group shares are held by institutional investors. Comparatively, 36.8% of Oaktree Specialty Lending shares are held by institutional investors. 17.4% of Westwood Holdings Group shares are held by company insiders. Comparatively, 0.3% of Oaktree Specialty Lending shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.
Profitability
This table compares Westwood Holdings Group and Oaktree Specialty Lending’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Westwood Holdings Group | 7.73% | 8.10% | 6.59% |
| Oaktree Specialty Lending | 14.45% | 9.70% | 4.64% |
Analyst Recommendations
This is a summary of current ratings for Westwood Holdings Group and Oaktree Specialty Lending, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Westwood Holdings Group | 0 | 0 | 1 | 0 | 3.00 |
| Oaktree Specialty Lending | 0 | 6 | 0 | 0 | 2.00 |
Oaktree Specialty Lending has a consensus target price of $11.83, suggesting a potential downside of 6.60%. Given Oaktree Specialty Lending’s higher possible upside, analysts clearly believe Oaktree Specialty Lending is more favorable than Westwood Holdings Group.
Earnings and Valuation
This table compares Westwood Holdings Group and Oaktree Specialty Lending”s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Westwood Holdings Group | $101.70 million | 1.75 | $7.06 million | $0.88 | 21.35 |
| Oaktree Specialty Lending | $53.53 million | 20.85 | $33.92 million | $0.48 | 26.40 |
Oaktree Specialty Lending has lower revenue, but higher earnings than Westwood Holdings Group. Westwood Holdings Group is trading at a lower price-to-earnings ratio than Oaktree Specialty Lending, indicating that it is currently the more affordable of the two stocks.
Summary
Westwood Holdings Group beats Oaktree Specialty Lending on 9 of the 16 factors compared between the two stocks.
About Westwood Holdings Group
Westwood Holdings Group, Inc., through its subsidiaries, manages investment assets and provides services for its clients. The company operates in two segments, Advisory and Trust. The Advisory segment provides investment advisory services to corporate retirement plans, public retirement plans, endowments, foundations, individuals, and the Westwood Funds; and investment sub-advisory services to mutual funds, pooled investment vehicles, and its Trust segment. The Trust segment offers trust and custodial services; and participates in common trust funds that it sponsors to institutions and high net worth individuals. Westwood Holdings Group, Inc. was founded in 1983 and is based in Dallas, Texas.
About Oaktree Specialty Lending
Oaktree Specialty Lending Corporation is a business development company. The fund specializing in investments in middle market, bridge financing, first and second lien debt financing, unsecured and mezzanine loan, mezzanine debt, senior and junior secured debt, expansions, sponsor-led acquisitions, preferred equity, and management buyouts in small and mid-sized companies. It seeks to invest in education services, business services, retail and consumer, healthcare, manufacturing, food and restaurants, construction and engineering. The firm also seeks investment in media, advertising sectors, software, IT services, pharmaceuticals, biotechnology, real estate management and development, chemicals, machinery, and internet and direct marketing retail sectors. It invests between $5 million to $75 million principally in the form of one-stop, first lien, and second lien debt investments, which may include an equity co-investment component in companies. The firm invest in companies having enterprise value between $20 million and $150 million and EBITDA between $3 million and $50 million. The fund has a hold size of up to $75 million and may underwrite transactions up to $100 million. It primarily invests in North America. The fund seeks to be a lead investor in its portfolio companies.