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Proprietary Data Insights Financial Pros Top Asset Manager Stock Searches in the Last Month
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Asset Managers |
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Alt Investments Are Heating Up
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In case you weren’t paying attention, the Fed reminded us it’s in control of asset prices. Based on the latest data from our proprietary sentiment indicator, Trackstar, investors are on the hunt for alternative investments and the companies that specialize in them, specifically Apollo Global Management (APO). APO’s search volume from financial pros skyrocketed with news of the company’s involvement in several deals, including:
In a slowing economy, Apollo is extra busy. But does that translate into shareholder value? Apollo Global Management’s Business Apollo Global Management is a high-growth asset manager specializing in investments in credit, private equity, and real estate markets. Its business includes asset management, global wealth management solutions, and retirement services. Source: Apollo Global Management Apollo’s private equity business has $92 billion worth of assets under management, with over 175 portfolio companies since its inception. Apollo’s Yield business offers lending and capital solutions to private and public companies. This segment has $373 billion in assets under management and employs over 300 investment professionals. The firm has a rich history of acquiring, rebuilding, and growing domestic businesses. Over the years, some of its more notable investments include Yahoo, Sirius Satellite Radio, Barnes & Noble, Chuck E. Cheese, ADT, and McGraw Hill Education. Financials Source: Stock Analysis Apollo earned a record fee-related $365 million in Q3 2022. At the same time, it hit $523 billion in assets under management, another new record, thanks to strong asset management and retirement services inflows totaling $34 billion. The company deployed $37 billion in gross capital in Q3 and $175 billion over the last 12 months. In addition, it collected record transaction fees in Q3. Management fees rose 16% YoY. Apollo is financially stable, with a current ratio of 2.5x. The firm has $19.1 billion in total cash and $19.5 billion in total debt. Moreover, it hit an operating cash flow of $1.25 billion over the last 12 months. And it pays an annual dividend of $1.60 per share, or 2.4%. Valuation Source: Seeking Alpha APO trades at a P/E non-GAAP ratio of 12.99x, notably lower than peers Blackstone (BX) at 13.51x and BlackRock (BLK) at 21.14x, but more expensive than KKR & Co. (KKR) at 10.5x and The Bank of New York Mellon (BK) at 10.3x. Apollo’s price-to-sales ratio of 4.37x is lower than BX at 4.89x, BLK at 5.74x, and KKR at 4.45x, but higher than BK at 2.2x. Profitability Source: Seeking Alpha APO suffered $2.8 billion in investment-related losses in the retirement services business during Q3. Additionally, it had a $3.2 billion liability in Q3 from future policy and other policy benefits from its retirement services business. This caused the firm’s gross profit margins to turn negative, -62%, grossly underperforming its peers BX at 79%, BLK at 49.8%, and KKR at 55.8%. Typically, APO’s gross margin is 87.5% based on a five-year average. Additionally, Apollo’s return on assets remains positive at 8.5%, higher than BLK at 4.1%, KKR at 0.5%, and BK at 1.29%, but lower than BX at 29.5%. Growth Source: Seeking Alpha APO had explosive revenue growth over the last year, 21.6%. Its competitors didn’t fare as well. Most have had negative growth, with BX at -41.6%, BLK at -0.55%, KKR at -72.6%, and BK at 3.22%. In addition, APO has had a three-year CAGR of 58.2%, while BX is at 29.2%, BLK is at 10%, KKR is at 15.7%, and BK is at 1.6%.
Our Opinion 8/10 APO specializes in alternative investments. Demand for alt investments wasn’t high during the stock market’s raging bull market. But a higher-interest-rate environment and demand for non-correlated investments should benefit APO. The stock trades at a bit of a premium now, though. We’d start a position between $55 and $60 and buy any dips further down. |
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