Apollo Commercial Real Estate Finance’s (ARI) Problems Don’t Stop at COVID-19

Diamond Hill Capital recently released its Q1 2020 Investor Letter, a copy of which you can download below. The Diamond Hill Small Cap Fund posted a return of -36.17% for the quarter, underperforming its benchmark, the Russell 2000 Index which returned -30.61% in the same quarter. You should check out Diamond Hill Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Diamond Hill Capital highlighted a few stocks and Apollo Commercial Real Estate Finance Inc. (NYSE:ARI) is one of them. Apollo Commercial Real Estate Finance is a real estate investment trust company. Year-to-date, Apollo Commercial Real Estate Finance Inc. (NYSE:ARI) stock lost 39.2% and on June 8th it had a closing price of $12.16. Here is what Diamond Hill Capital said:

“Shares of real estate investment trust (REIT) Apollo Commercial Real Estate Finance, Inc. declined along with many other mortgage REITs. While the company isn’t exposed to the margin call issues of other mortgage REITs, its risky loan book, especially in hotels and construction, are particularly at risk in this downturn, which could lead to additional loan losses, reduced book value, and lower dividends. We covered our position after the shares reached our estimate of intrinsic value.”

REIT Stocks Northstar Realty Finance NRF

In Q4 2019, the number of bullish hedge fund positions on Apollo Commercial Real Estate Finance Inc. (NYSE:ARI) stock increased by about 60% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with ARI’s downside potential. Our calculations showed that Apollo Commercial Real Estate Finance Inc. (NYSE:ARI) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.