Apollo Investment Corp. (AINV): Are Hedge Funds Right About This Stock?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Apollo Investment Corp. (NASDAQ:AINV) investors should pay attention to an increase in support from the world’s most successful money managers recently. There were 11 hedge funds in our database with AINV holdings at the end of September, up by 3 quarter-over-quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as WestAmerica Bancorp. (NASDAQ:WABC), Huron Consulting Group (NASDAQ:HURN), and MaxLinear, Inc. (NYSE:MXL) to gather more data points.

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How are hedge funds trading Apollo Investment Corp. (NASDAQ:AINV)?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a 38% boost from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AINV over the last 5 quarters, which was kicked off by a huge drop in Q4 2015. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, D E Shaw, one of the biggest hedge funds in the world, holds the most valuable position in Apollo Investment Corp. (NASDAQ:AINV). D E Shaw has a $3.4 million position in the stock. Coming in second is Robert Raiff of Raiff Partners, with a $1.8 million position; 2.3% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish contain Robert B. Gillam’s McKinley Capital Management, Thomas G. Maheras’ Tegean Capital Management, and Joshua Packwood and Schuster Tanger’s Radix Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As one would reasonably expect, key hedge funds have been driving this bullishness. Raiff Partners established the most outsized position in Apollo Investment Corp. (NASDAQ:AINV). Israel Englander’s Millennium Management also initiated a $0.2 million position during the quarter. The other funds with brand new AINV positions are Ken Griffin’s Citadel Investment Group, Neil Chriss’ Hutchin Hill Capital, and David Costen Haley’s HBK Investments.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Apollo Investment Corp. (NASDAQ:AINV) but similarly valued. These stocks are WestAmerica Bancorp. (NASDAQ:WABC), Huron Consulting Group (NASDAQ:HURN), MaxLinear, Inc. (NYSE:MXL), and FibroGen Inc (NASDAQ:FGEN). All of these stocks’ market caps are closest to AINV’s market cap.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $9 million in AINV’s case. MaxLinear, Inc. (NYSE:MXL) is the most popular stock in this table. On the other hand WestAmerica Bancorp. (NASDAQ:WABC) is the least popular one with only 6 bullish hedge fund positions. Apollo Investment Corp. (NASDAQ:AINV) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MXL might be a better candidate to consider taking a long position in.

Disclosure: None